materiality

Relative importance is measuring the cost with the benefit. For example, there are sales worth $200 million and there are other losses worth $200. The company does not classify the other losses and adds the value within the sales value due to relative importance.

Materiality is the threshold of significance used in accounting and auditing; an item is material if omitting or misstating it could influence the decisions of users of financial statements.

- Used in audit planning to understand risks and design procedures.
- Used during testing (controls/substantive) and documentation of audit evidence and conclusions.

- Example: The auditor references **materiality** when designing procedures and documenting conclusions in the audit file.

- Why it matters: Supports high-quality, defensible audit conclusions and helps detect material misstatements and control weaknesses.