The concept of audit materiality and attitudes towards materiality threshold disclosure among Maltese audit practitioners

Abstract

Materiality permeates the audit process and is a term often used to describe the scope of the auditor’s responsibility to the general public. This paper attempts to evaluate the Maltese auditing profession’s perceptions and use of the concept of materiality in the performance of an audit as well as attitudes towards disclosure of materiality thresholds. Results from personal in-depth interviews with twenty-four practitioners show that although considerable importance is attached to qualitative aspects of materiality, professional judgment is applied to establish quantitative materiality thresholds. Practitioners in Malta do not seem to treat materiality uniformly, with various materiality thresholds applied in practice. Nevertheless, prescriptive guidelines are not advisable. The proposal of disclosing materiality thresholds to reduce the omnipresent expectations gap was strongly rejected. It is the authors’ view that such disclosures, need to be adequately regulated and users would need a proper understanding of materiality and audit methodologies.