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On January 31, 2019 No. 53639

Appendix No. 12

to the Order of the Ministry of Finance of the Russian Federation of January 9, 2019 No. 2n

International standard of audit 320 "Materiality in case of planning and carrying out audit"

The International Standard of Audit (ISA) 320 "Materiality in case of planning and carrying out audit" should be considered together with MCA 200 "Main objectives of the independent auditor and carrying out audit according to International standards of audit".


Scope of this standard

1. This International Standard of Audit (ISA) establishes the auditor's obligations on application of the concept of materiality when planning and carrying out financial records audit. MCA 450 <1> explains how the principle of materiality in case of impact assessment on audit of the revealed misstatements is applied, and also influences of uncorrected misstatements if such are available, on the financial reporting.


<1> MCA 450 "Assessment of the misstatements revealed during audit".

Materiality in the context of audit

2. In various concepts of preparation of the financial reporting the concept of materiality is considered in the context of preparation and accounts presentation. Though the approach provided by various concepts can differ, usually in them it is specified that:

- misstatements, including omissions, are considered essential if they separately or are in total capable as it can be assumed reasonably, to influence the economic decisions made by users on the basis of the financial reporting;

- professional judgments concerning materiality are accepted taking into account all attending circumstances and such factors as the size or nature of misstatement, or both of these factors at the same time exert impact on them;

- judgments concerning materiality of these or those questions for users of the financial reporting are taken out proceeding from total information requirements of users as groups <2>. Possible influence of misstatements on certain users, whose requirements can vary considerably, is not considered.


<2> So, for example, the "Concept of preparation and accounts presentation" accepted by Council for International accounting standards in April, 2001 specifies that in the commercial organization where investors act as source of risk capital, accounts presentation which satisfies their requirements, will also satisfy the majority of needs of other users of the financial reporting.

3. Such provisions if they contain in the applied concept of preparation of the financial reporting, are basis for the auditor in case of determination of materiality for the purposes of audit. If the applicable concept of preparation of the financial reporting does not contain relevant provisions, then the characteristics of materiality described in Item 2 act as such basis for the auditor.

4. Determination by the auditor of materiality is subject of professional judgment and depends on understanding the auditor of needs for financial information of users of the financial reporting. Taking into account it it is reasonable to auditor to assume that users:

(a) have reasonable awareness on business and economic activity, and also on financial accounting and intend with reasonable care to study information provided in the financial reporting;

(b) understand that the financial reporting prepares, it is represented and it is audited proceeding from this or that level of materiality;

(c) recognize the uncertainty inherent in change of size of this or that amount on the basis of estimations, judgments and forecasting of future events;

(d) make reasonable economic decisions on the basis of information containing in the financial reporting.

5. The principle of materiality is applied by the auditor both when planning, and when carrying out audit, and also in case of impact assessment on audit of the revealed misstatements, in case of impact assessment on the financial reporting of uncorrected misstatements if such are available, and in case of opinion formulation in audit opinion (see Item A 1).

6. When planning audit the auditor creates judgment of the amount of misstatements which will be considered as essential. This judgment creates basis:

(a) determinations of nature, terms and amount of assessment procedures of risks;

(b) identifications and risks assessments of essential misstatement;

(c) determinations of nature, terms and amount of further audit procedures.

The materiality determined at audit planning stage not necessarily sets size, it is less by which uncorrected misstatements separately or in total will be always estimated as insignificant. The specific circumstances relating to these or those misstatements can form the basis for assessment by the auditor of such misstatements as essential even if they appeared less than the established materiality size. To impracticablly develop the audit procedures allowing to find all misstatements which can be essential only owing to their nature. However reasons concerning nature of potential misstatements in disclosure of information are important in case of development of audit procedures in response to risks of essential misstatements <3>. Also in case of impact assessment of all uncorrected misstatements on the financial reporting the auditor analyzes not only their amount, but also nature, and also circumstances of their origin <4> (see the Item A2a).


<3> See MCA 315 (reviewed) "Identification and risks assessment of essential misstatement by means of studying of the organization and its environment", the Items A134a - A135b.

<4> MSA 450, Item A21.

The effective date

7. This standard becomes effective concerning financial records audit for the periods beginning on December 15, 2009 or after this date.


8. The purpose of the auditor consists in that when planning and carrying out audit properly to apply the principle of materiality.


9. For the purposes of International standards of audit materiality for accomplishment of audit procedures means the size or sizes established by the auditor it is less than materiality for the financial reporting in general to reduce to is acceptable low level probability that the cumulative size of uncorrected and undetected misstatements will exceed materiality for the financial reporting in general. In certain cases materiality for accomplishment of audit procedures also means the size or sizes established by the auditor it is less than the level or levels of materiality for certain transaction types, account balances or disclosure of information.


Determination of materiality for the financial reporting in general and for accomplishment of audit procedures when planning audit


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