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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.

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