Revising materiality during the audit
When ISA 320 requires materiality to be revised mid-audit, what changes for samples and testing, and how the earlier approval stays visible on the file.
By Achekam · · 5 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
Materiality was set at planning from management accounts that showed a healthy profit. Then the draft statements arrived, with a large inventory write-down and a bad debt the client had not mentioned, and profit is a fraction of what was expected. The samples are drawn, much of the testing is done, and every judgement so far was made against a materiality figure that no longer reflects the client's actual results.
ISA 320 anticipates this. Materiality is set at the start with the information available, and it must be revised when the auditor becomes aware of information that would have led to a different figure. The revision is not a failure of planning. Not revising is.
Triggers: figures change, new information arrives
ISA 320 requires the auditor to revise materiality for the statements as a whole, and any specific materiality levels, when information comes to light during the audit that would have caused a different amount to be determined initially. Common triggers:
- The benchmark moves. Draft or final figures differ significantly from the forecasts, budgets or management accounts used at planning.
- Adjustments change the picture. Audit adjustments reduce profit or assets materially.
- The business changes. A division is sold or closed, a major contract is lost, or the client decides to restructure.
- Users change. A sale of the business, a new lender or a listing makes different figures matter to different readers.
ISA 450 adds a final check: before evaluating the effect of uncorrected misstatements, the auditor reassesses materiality to confirm it is still appropriate in the context of the entity's actual results.
Revisions can go either way, but they deserve different degrees of scepticism. A downward revision because results are worse than expected is routine. An upward revision late in the audit, especially one that happens to make an uncorrected misstatement immaterial, needs a strong and documented reason.
Re-approving while the old approval is kept
ISA 320 requires the file to document any revision of materiality as the audit progresses. The clearest documentation is two approvals, both visible: the original with its rationale and the revised one with its reasons.
In Achekam, staff propose overall, performance and clearly-trivial materiality from a benchmark with a written rationale, Achekam suggests no percentage, and the engagement partner approves, never the preparer. A new approval replaces the old one, and the old one is kept. So a revision goes through the same route as the original: a preparer proposes the revised figures with reasons, and the engagement partner approves them.
Record Governance, under Quality & Governance, keeps a log of changes to governed records showing who did what, when and with what result, which can be filtered and checked for an unbroken chain. It covers records under record governance, not every screen, so rely on the kept approval and its rationale as the materiality history, and treat the log as support where it applies.
Knock-on effects on samples and testing
When overall materiality is revised downwards, ISA 320 requires the auditor to consider whether performance materiality also needs revising, and whether the nature, timing and extent of further audit procedures remain appropriate. In practice:
- Samples already drawn were sized against the old performance materiality. Lower tolerable misstatement usually means a larger sample. Decide whether to extend the samples or accept the existing ones with reasons.
- Thresholds for investigating analytical differences and for selecting specific items may need lowering.
- Balances scoped out as immaterial at planning may now be material and need work.
- Misstatements already found need re-evaluating, including whether some below the old clearly trivial threshold should now be accumulated.
In Achekam's Audit Intelligence, no sample size is proposed without approved materiality and a confidence level, a reviewer who did not prepare the plan approves it before the draw, and every draw can be reproduced from its stored seed. Once the revised materiality is approved, an extended sample goes through the same plan and approval, and the stored seeds show which items were drawn under which plan. That keeps a clear line between work done before and after the revision.
Explaining the change to the reviewer
The rationale for a revision should answer four questions:
- What has changed since the original approval, with figures from the source?
- Which benchmark does the revised figure use, and is it the same as before? If not, why not?
- What has been done about samples, thresholds and scoping as a result?
- Does the revision affect the evaluation of any misstatement already found?
A worked example in words: planning materiality was based on profit before tax from management accounts. The draft statements show profit much lower after a write-down of inventory. The team keeps profit before tax as the benchmark, because users still focus on it and the write-down is not a one-off but reflects real trading conditions. Materiality is revised downwards and re-approved. The inventory and receivables samples are extended under new approved plans, and balances previously scoped out as immaterial are now tested. The rationale says all of this in a paragraph.
Final materiality at completion
At completion, the reassessment under ISA 450 is the last chance to check that materiality reflects the final figures. Lead schedules in Achekam are built from the engagement's trial balance with each figure traceable to its lines, and staff record audit adjustments on a line with a reason, so the final benchmark figure can be traced to the statements after every adjustment.
If final results differ again from those used for the revision, revisit materiality once more before evaluating uncorrected misstatements. The full text of ISA 320 and ISA 450 is in the IAASB's 2026 Handbook, the download page for the complete auditing standards. How the original approval works is covered in setting and approving materiality on an audit, and choosing the benchmark in choosing a materiality benchmark.
Make it a checkpoint
Add a materiality checkpoint to the day the draft statements arrive: compare the draft benchmark figure with the planning figure, and if the difference would have changed the original decision, start the revision that day rather than at completion.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
