## Revision and Documentation of Materiality (SA 320)
### When Should Materiality Be Revised?
Materiality set at planning is not fixed — it must be revised if circumstances change.
Triggers for Revision:
| Trigger | Example |
|---|---|
| Changes in circumstances | Entity decides to dispose of a major part of its business |
| New information | Discovery of a contingent liability of significant size |
| Change in auditor's understanding | Further audit procedures reveal new insights about entity operations |
| Actual results differ significantly from initially anticipated results | Budgeted PBT was ₹5 crores; actual is ₹50 lakhs — original benchmark no longer appropriate |
---
### Effect of Adopting a Lower Materiality
If the auditor revises materiality downward (lower), the auditor must re-assess:
1. Whether performance materiality also needs to be adjusted (to remain lower than revised overall materiality)
2. Whether the nature, timing & extent of audit procedures remain suitable — more procedures or larger sample sizes may be needed
---
### Documentation Requirements
The auditor's working papers must include the following amounts and factors considered in their determination:
| Item | What to Document |
|---|---|
| a | Materiality for FS as a whole — amount and basis |
| b | Materiality level for particular classes of transactions, account balances, disclosures |
| c | Performance materiality — amount and rationale |
| d | Any revisions to (a), (b) or (c) as the audit progressed |
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### Summary: The Three Materiality Levels
```
Overall Materiality (FS as a whole)
└── Performance Materiality ← always lower
└── Assertion-Level Materiality ← for specific items, even lower
All subject to revision as audit progresses
```