ANNEX B

Sample Accomplished 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
Step 2 Choose a percentage to The purpose of this template is to document the materiality
use within the given range
thresholds used in audit, in accordance with ISSAI 1320.14 and
Step 3 Compute the testing
threshold 1450.15.
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
 ANNEX B
Sample Accomplished Template

TEMPLATE
Computation of Materiality Thresholds in Financial Audit

Agency Name Agency XYZ

Audit Period DECEMBER 31, 2017

Audit Team/ Group

Cluster/Region, Sector

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 performance materiality, testing threshold and
Observations and Recommendations threshold for clearly trivial matters
(whichever may be applicable)  for: planning and execution phases
 will determine and use: planning materiality,
performance materiality, testing threshold and
Head/Central Office (itself) threshold for clearly trivial matters
Management Letter (if applicable)  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
Whole Agency / Whole Group  for: reporting phase
Consolidated Annual Audit Report  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 November 30, 2017.

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

Others: The auditor used estimates based on _______________________________

____________________________________________________________________
____________________________________________________________________
 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
Total Asset was selected as the most appropriate benchmark since the agency is not a profit-oriented entity
and loans extended to Water Districts and water cooperatives form significant part of the Total Assets of
the agency. Agency XYZ is a government-owned and controlled corporation (GOCC) with a specialized
lending function mandated by law to promote and oversee the development of water supply systems in
provincial cities and municipalities outside Metropolitan Manila. As stated in PD 198, which was amended
by Section 22 of PD 768, the Administration shall, among others: (1) prescribe minimum standards and
regulations in order to assure acceptable standards of construction materials and supplies, maintenance,
operation, personnel training, accounting and fiscal practices for local water utilities; (2) furnish technical
assistance and personnel training programs for local water utilities; (3) monitor and evaluate local water
standards; and (4) effect systems integration, joint investment and operations, district annexation and
deannexation whenever economically warranted.

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

Percentage of Benchmark Selected

Check one.
Percentage
Benchmark Reasons for percentage selection
Lower Higher
The team applied conservatism in choosing the
appropriate percentage for overall materiality
computation. Paragraph 12 of ISSAI 1320 requires the
auditor to revise materiality for the financial statements
as a whole in the event of becoming aware of
information during the audit that would have caused the
auditor to have determined a different amount (or
Total Assets 0.5% 1%
amounts) initially. The use of conservative approach is to
provide buffer when revising, if applicable, materiality
when year-end balance of Total Asset differs materially.

Based on the results of prior year audit engagements

(adverse opinion), the level of findings identified
suggests that lower materiality threshold should be used.
Percentage of Benchmark Selected
Check one.
Percentage
Benchmark Reasons for percentage selection
Lower Higher
Total Expenditure 0.5% 2%
Total Revenue 0.5% 2%
Equity 1% 2%
Total Liabilities 1% 2%
Retained
Operating 1% 5%
Surplus
Profit before tax 1% 5%

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

Benchmark (₱) Percentage Overall Planning Materiality (₱)
(a) (b) (a x b)
15,529,620,648.09 0.5% 77,648,103.24
(Total Assets based on November
2017 Trial Balance)

C. OVERALL PERFORMANCE MATERIALITY

1. Compute the extent of misstatements in the previous year (Specific Guidelines A.2.1)
Total Misstatements in previous Overall planning materiality of the Extent of misstatements in
year (₱) current year (₱) (Template B.3) previous year (%)
𝑎
(a) (b) ( ) x 100
𝑏
1,054.90 Million 77,648,103.24 1,358.6%
(refer to analysis of PY
misstatements)

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 (₱)
(Template B.3) Percentage Overall Performance materiality (₱)
(a) (b) (a x b)

77,648,103.24 50% 38,824,051.62

 D. SPECIFIC PLANNING and PERFORMANCE MATERIALITY

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

A.3.1)
Total Assets
Total Expenditure
Particular class of transaction / account Total Revenue
balance/ disclosure
Equity
NOT APPLICABLE Total Liabilities
Retained Operating Surplus
Profit Before Tax

Amount (₱)
NOT APPLICABLE
Reason/s for setting specific planning materiality
Select and explain at least one, whichever is/are applicable
Laws, regulations or the requirements of NOT APPLICABLE
the applicable financial reporting
framework affect users’ expectations
Key disclosures in relation to the industry NOT APPLICABLE
in which the entity operates
Disclosures of significant events and NOT APPLICABLE
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)
NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE

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)
NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE

E. TESTING THRESHOLD (Specific Guidelines A.4)

Percent of
Risk of Material performance Testing Threshold
Accounts in ARAPT Part A Misstatement materiality used (Col. 3 x Performance
(from ARAPT) (Table 5 of materiality)
guidelines)
(1) (2) (3) (4)

Cash-Collecting Officers Low 51% 19,800,266

(51% x 38,824,051.62)

Cash in Bank-Local Currency, 3,882,405

High 10%
Current Accounts (10% x 38,824,051.62)

Cash in Bank – Local Currency, 3,882,405

High 10%
Savings Account (10% x 38,824,051.62)

Loans Receivables – GOCCs High 10% 3,882,405

(10% x 38,824,051.62)

Interest Receivables High 10% 3,882,405

(10% x 38,824,051.62)

Due from Officers and 3,882,405

High 10%
Employees (10% x 38,824,051.62)

Advances to Special Disbursing 3,882,405

High 10%
Officers (10% x 38,824,051.62)

Other Receivables High 10% 3,882,405

(10% x 38,824,051.62)

Office Supplies Inventory Moderate 26% 10,094,253

(26% x 38,824,051.62)

Investments Moderate 26% 10,094,253

(26% x 38,824,051.62)

Office Buildings Moderate 26% 10,094,253

(26% x 38,824,051.62)

Office Equipment, Furniture 3,882,405

High 10%
and Fixtures (10% x 38,824,051.62)

Travelling Expenses - Local Minimal 26% 10,094,253

(76% x 38,824,051.62)
 Percent of
Risk of Material performance Testing Threshold
Accounts in ARAPT Part A Misstatement materiality used (Col. 3 x Performance
(from ARAPT) (Table 5 of materiality)
guidelines)
(1) (2) (3) (4)

Restricted Fund High 10% 3,882,405

(10% x 38,824,051.62)

Long-Term Loans Receivables

(Loans Receivables – Water High 10% 3,882,405
(10% x 38,824,051.62)
Districts)
Long-Term Loans Receivables
(Loans Receivables – Water High 10% 3,882,405
(10% x 38,824,051.62)
Districts - ESBI)
Long-Term Loans Receivables 3,882,405
High 10%
(Restructured Receivables) (10% x 38,824,051.62)

Long-Term Loans Receivables

(Unbilled Loans and Accounts High 10% 3,882,405
(10% x 38,824,051.62)
Receivables - WD)
Long-Term Loans Receivables
(Miscellaneous Receivables – High 10% 3,882,405
(10% x 38,824,051.62)
WDs (PSF))
Receivership and Liquidation 3,882,405
High 10%
Receivable (10% x 38,824,051.62)

Deferred Tax Assets High 10% 3,882,405

(10% x 38,824,051.62)

Trust Liabilities High 10% 3,882,405

(10% x 38,824,051.62)

Deferred Tax Liability High 10% 3,882,405

(10% x 38,824,051.62)

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)
77,648,103.24 0.5% 388,240.52

Prepared by: Reviewed by:

xxx xxx xxx xxx
Audit Team Leader Date Supervising Auditor Date

Approved by:
xxx xxx
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
We used the original computed overall materiality of
Overall Planning ₱77,403,304.64 in the evaluation of misstatements since the
Materiality estimated and actual year-end balances do not differ substantially
from each other.
Overall performance is not revised since we used the original overall
Overall Performance
planning materiality and the extent of audit procedures remained
Materiality
appropriate.

Specific Planning
Materiality NOT APPLICABLE
(if applicable)

Specific Performance
Materiality NOT APPLICABLE
(if applicable)

*Use additional sheet/s if necessary

If revised, state details of revisions.

Initial amount Final amount Remarks

Overall Planning Materiality NOT APPLICABLE

Overall Performance
NOT APPLICABLE
Materiality
Specific Planning Materiality
NOT APPLICABLE
(if applicable)
Specific Performance
NOT APPLICABLE
Materiality (if applicable)

Prepared by: Reviewed by:

xxx xxx xxx xxx

Audit Team Leader Date Supervising Auditor Date

Approved by:

xxx xxx
Cluster/Regional Director Date