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Threshold for Investigation Calculator for Substantive Analytics (AU-C 520)

What do these figures come to once the work is shown?

Build the acceptable difference from your chosen share of performance materiality and of the balance, then flag the recorded amount against your expectation.

  • Runs in your browser
  • Nothing stored or sent
  • Free, no sign-up
Your figures
Example figuresIllustrative only. Type over them with your own.
Threshold for investigation
$75,000
Difference you accept without further work
From performance materiality
$75,000
From the balance
$100,000
Drawn to one scale
From performance materiality$75,000
From the balance$100,000
Threshold for investigation$75,000
Expectation$2,000,000
Recorded amount$2,095,000
Difference (recorded less expected)$95,000
All results
MeasureResult
From performance materiality$75,000
From the balance$100,000
Threshold for investigation
The lower of the two amounts
$75,000
Expectation$2,000,000
Recorded amount$2,095,000
Difference (recorded less expected)$95,000
Difference as % of expected4.75%
InvestigateYes: difference exceeds the threshold
How this was worked out
Work shownrecomputed as you type
Amount A = performance materiality x your percentage
Amount B = expected balance x your percentage (optional)
Threshold = lower of A and B
Investigate when |recorded - expectation| > threshold

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • Amount A = performance materiality x your percentage
  • Amount B = expected balance x your percentage (optional)
  • Threshold = lower of A and B
  • Investigate when |recorded - expectation| > threshold

How it works

AU-C 520 paragraph .05 requires the auditor to determine the amount of any difference from the expectation that is acceptable without further investigation. Paragraph .A24 says that amount is influenced by materiality and the desired level of assurance, and that it decreases as assessed risk increases. The standard sets no percentage: the percentages here are your firm's policy.

The threshold only works with an expectation precise enough to detect a difference that size. Paragraph .A22 ties precision to how well the result can be predicted and how far the data can be disaggregated. A threshold smaller than the expectation's own error band flags noise, not misstatement.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

Why use the lower of two amounts?

A percentage of performance materiality alone is too loose for small balances. Capping it by a share of the balance keeps the test meaningful for both large and small accounts.

What do I do with a difference over the threshold?

Paragraph .07 of AU-C 520 requires inquiry of management and other procedures to corroborate the explanation.

Should the threshold change with risk?

Yes. Higher assessed risk calls for a smaller acceptable difference, per AU-C 520 .A24.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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