Performance materiality
Performance materiality is less than the overall materiality level. It is reduced to allow for the risk that there may be several more minor errors or omissions that the auditor needs to identify. These smaller items could be material when aggregated, so the performance materiality level is set to accommodate them. Thus, performance materiality reduces the probability that the aggregate amount of uncorrected and undetected misstatements exceeds the materiality level for the financial statements as a whole [AccountingTools].
In other words, this refers to the amount of variation that can exist in individual financial accounts due to errors and omissions without affecting the auditor’s opinion regarding the objectivity of financial statements. Performance materiality does not have to be set for all individual accounts, as this can be done for a selected or particular class of accounts. Performance materiality is determined to assess audit risk [Difference Between].
What is Performance Materiality? AccountingTools. Retrieved from: https://www.accountingtools.com/articles/performance-materiality
Difference Between Materiality and Performance Materiality. Difference Between. Retrieved from: https://www.differencebetween.com/difference-between-materiality-and-vs-performance-materiality/