Sa 320 querry

Hey Ravi, let me attempt to make you understand the concept of performance materiality. See, the term "MATERIALITY" means important items which may affect the decision of the users of financial statements. This materiality level depends on size (amount) and Nature(violation of law or AS). Materiality is to be considered while planning the audit and also while performing the audit. Performance Materiality is level determined by the auditor which is less than the materiality level. Let us consider this practical example to further understand the concept- suppose the auditor is checking cash book. He sets materiality level as Rs.1200. Now in order to reduce the risk that in fact misstatements do not exceed this materiality level (i.e Rs1200), he sets another level called performance materiality level (which is less than materiality level) say at Rs.700. Now in course of checking the cash book, if the auditor finds misstatements are more than rs700(performance materiality level) then he will perform more indepth checking of cash book to assure that in reality misstatements are not more than rs.1200 (materiality level). Hope this example will help you. Further queries still welcome. Will be more than happy to help you. Regards ASHISH PATHAK

If you are comfortable with hindi then consider my explanation in simple hindi as follow- "Auditor 2 level decide Karega. Performance Materiality Level ko Materiality level se kam rakhega so that auditor apna Shak (doubt) clear kar sake ki sach may kahi misstatements Material level se jyada toh nahi.

Hi you can find the exact meaning of Performance materiality with practical examples and videos here 

www.deepakbora.com in SA 320 post under audit for ca section.

Please feel free to contact me via queries if you have further questions on this topic.