ANNEX A

Materiality Template

Overall planning materiality

Step 1 Choose an appropriate
benchmark
Step 2 Choose which
percentage to use
Step 3 Compute the overall
planning materiality
Overall performance materiality
Step 1 Compute the extent of
misstatements in prior
year/s
Step 2 Select percentage to be
used
Step 3 Compute the overall
performance materiality
Specific planning materiality and
performance materiality
thresholds
Step 1 Determine specific
planning materiality, if TEMPLATE
necessary
Step 2 Determine specific Computation of Materiality Thresholds in
performance materiality, if Financial Audit
a specific planning
Adopted thru COA Resolution No. 2019-016
materiality is set
dated 25 June 2019
Testing Threshold
Step 1 Identify the Risk of Material
Misstatement (RMM) for
the accounts in the ARAPT
The purpose of this template is to document the materiality
Step 2 Choose a percentage to
use within the given range
thresholds used in audit, in accordance with ISSAI 1320.14 and
Step 3 Compute the testing 1450.15.
threshold
Threshold for clearly trivial matters
Step 1 Select a percentage of
the overall planning
materiality to use as the
threshold for clearly trivial
matters
Step 2 Compute the threshold for
clearly trivial matters
TEMPLATE
Computation of Materiality Thresholds in Financial Audit

Agency Name Municipal Government of Kibawe

Audit Period Calendar Year 2018

Audit Team/ Group Team R10-07

Cluster/Region, Sector Local Government Sector Group C

Check one. (General Guidelines F to G)

 will determine and use: planning materiality,
Stand-Alone Agency performance materiality, testing threshold and
Annual Audit Report threshold for clearly trivial matters
 for: planning, execution and reporting phases

Regional Office / Component  will determine and use: planning materiality,

Management Letter/ Summary of Audit
Observations and Recommendations
(whichever may be applicable)
Head/Central Office (itself)
Management Letter (if applicable)
Whole Agency / Whole Group
Consolidated Annual Audit Report
performance materiality, testing threshold and
threshold for clearly trivial matters
 for: planning and execution phases
 will determine and use: planning materiality,
performance materiality, testing threshold and
threshold for clearly trivial matters
 for: planning and execution phases
 using: estimates based on the financial statements of
the head office before consolidation
 will determine and use: overall planning materiality
 for: reporting phase
 using: estimates based on the consolidated/combined
financial statements of the whole agency

A. BASIS of COMPUTATION (General Guidelines C)

The auditor used the previous year’s financial statements as s/he sees that the current year’s
financial results are likely to be the same

The auditor used the interim financial statements for the period January 1 to _______________.

The auditor used annualized balances (see Definition of Terms, Item No. 20)

Others: The auditor used estimates based on _______________________________

____________________________________________________________________
____________________________________________________________________

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 B. OVERALL PLANNING MATERIALITY

1. Choose an appropriate benchmark (Specific Guidelines A.1.1)

Total Assets
Total Expenditure
Total Revenue
Benchmark used Equity
Total Liabilities
Retained Operating Surplus
Profit Before Tax
Reason(s) for benchmark selection (Specific Guidelines A.1.1.1-3)
Consider the following:
 The elements of the financial statements by which users will be interested in and will focus on
 The nature of the entity, its ownership structure and the way it is financed
 The relative volatility of the benchmark
Since the LGU operation is budget driven, monitoring of actual expenditures is the primary consideration in
determining materiality figures. Furthermore, expense amounts have been more consistent in comparison to
other financial statement line items over several periods.

2. Choose which percentage to use, whether the lower or higher end (Specific Guidelines A.1.2)

Percentage of Benchmark Selected

Check one.
Percentage Reasons for percentage selection (Specific
Benchmark
Lower Higher Guidelines A.1.2)
Total Assets 0.5% 1%
We use the middle range because
because the auditee is an LGU has moderate
Total Expenditure 1.25% 2%
volume of transactions and compliance of its
internal control is high.
Total Revenue 0.5% 2%

Equity 1% 2%

Total Liabilities 1% 2%

Retained Operating Surplus 1% 5%

Profit before tax 1% 5%

Consider if agency is voluminous transactions (if yes, lower range), if volatile (if yes, use higher
range), if auditor is confident on the agency (if yes, higher range)

3. Compute the overall planning materiality (Specific Guidelines A.1.3)

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 Benchmark (₱) Percentage Overall Planning Materiality (₱)
(a) (b) (a x b)
61,531,014.44 1.25% 769,137.6805

C. OVERALL PERFORMANCE MATERIALITY

1. Compute the extent of misstatements in the previous year (Specific Guidelines A.2.1)

Total Misstatements in Overall planning materiality of the Extent of misstatements in

previous year (₱) current year (₱) (Template B.3) previous year (%)
𝑎
(a) (b) (𝑏 ) x 100
75,034,236.70 769,137.6805 9,755.631352

2. Select percentage to be used (Specific Guidelines A.2.2)

Performance Materiality
Extent of misstatements
(% of planning
in previous year
materiality)
0 – 40% 80%

40.01 – 100% 60%

Above 100% 50%

3. Compute the overall performance materiality (Specific Guidelines A.2.3)

Overall Planning Materiality (₱) Percentage Overall Performance

(Template B.3) (Template C.2) materiality (₱)
(a) (b) (a x b)
769,137.6805 50% 384,568.8403

D. SPECIFIC PLANNING and PERFORMANCE MATERIALITY

1. Determine whether it is necessary to apply specific planning materiality (Specific Guidelines

A.3.1)

Total Assets
Particular class of transaction / account Total Expenditure
balance/ disclosure
Total Revenue
Equity
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 Total Liabilities
Retained Operating Surplus
Profit Before Tax

Amount (₱)

Reason/s for setting specific planning materiality

Select and explain at least one, whichever is/are applicable
Laws, regulations or the requirements of
the applicable financial reporting
framework affect users’ expectations
Key disclosures in relation to the industry
in which the entity operates
Disclosures of significant events and
important changes in operations

2. Determine percentage to use (Specific Guidelines A.3.2)

Classes of transactions, account Percentage
balances or disclosures
Total Assets 0.125%
Total Expenditure
Total Revenue
Equity 0.25%
Total Liabilities
Retained Operating Surplus
Profit Before Tax

3. Compute the specific planning materiality (Specific Guidelines A.3.3)

Class of transactions, account Specific Planning Materiality

Percentage
balance or disclosure (₱) (₱)
(a) (b) (a x b)

4. The value of specific planning materiality shall be lower than the overall planning materiality;
otherwise, specific planning materiality shall not be set.
5. If a specific planning materiality is set, determine specific performance materiality (Specific
Guidelines A.3.5)
Specific Performance
Specific Planning Materiality (₱) Percentage
materiality (₱)
(a) (b) (a x b)

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 E. TESTING THRESHOLD (Specific Guidelines A.4)

Percent of
performance
Risk of Material Testing Threshold
materiality
Accounts Misstatement (Col. 3 x Performance
used
(From ARAPT) materiality)
(Table 5 of
guidelines)
(1) (2) (3) (4)
Cash in Bank - Local Currency, High 25% 96,142.21
Current Account
Inter-Agency Receivables High 25% 96,142.21
Inventory Held for Consumption Moderate 50% 192,284.42
Construction in Progress Moderate 50% 192,284.42
Loans Payable Low 25% 96,142.21
Trust Liability High 10% 38,456.88
Other Income Low 75% 288,426.63
Travel Expenses High 10% 38,456.88
Other MOOE High 10% 38,456.88

F. THRESHOLD for CLEARLY TRIVIAL MATTERS (if necessary) (Specific Guidelines A.5)

1. Select a percentage of the overall planning materiality to use as the threshold for clearly trivial
matters (0.25-0.5%)
2. Compute threshold for clearly trivial matters

Overall Planning Materiality Percentage

(Template B.3) (₱) (0.25-0.5%) Threshold for clearly trivial matters (₱)
(a) (b) (a x b)

Prepared by: Reviewed by:

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 Audit Team Leader Date Supervising Auditor Date

Approved by:

Cluster/Regional Director Date

Indicate if thresholds were revised during the conduct of the audit and before evaluation of
misstatements (Specific Guidelines C):

Revised? Reason/s (Specific Guidelines C.1)

Yes No

Overall Planning
Materiality

Overall Performance
Materiality

Specific Planning
Materiality
(if applicable)

Specific Performance
Materiality
(if applicable)

*Use additional sheet/s if necessary

If revised, state details of revisions.

Initial amount Final amount Remarks

Overall Planning Materiality

Overall Performance
Materiality
Specific Planning Materiality
(if applicable)
Specific Performance
Materiality (if applicable)

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Prepared by: Reviewed by:

Audit Team Leader Date Supervising Auditor Date

Approved by:

Cluster/Regional Director Date

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