Industry
↳ Lower percentage reflects regulated nature and public interest.
Benchmark
Performance Materiality
Reduces the probability that uncorrected misstatements exceed overall materiality.
Clearly Trivial
Misstatements below this need not be accumulated unless qualitatively material.
ISA 320 Decision Tree
One-page visual guide for benchmark selection — plus one practical audit insight per week.
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Benchmark Guidance
Healthcare entities operate under significant public interest considerations. Whether publicly funded hospitals, private healthcare groups, or pharmaceutical companies, the users of their financial statements include regulators, funding bodies, patients, and the general public.
Choosing the Right Benchmark
Revenue at 0.5–0.75% is typical for healthcare entities. The lower end applies to publicly funded healthcare institutions where accountability for public funds demands greater precision.
Key Audit Considerations
Government grants and subsidies require careful assessment of compliance conditions — clawback risk may make these balances qualitatively material.
Provisions for medical malpractice claims involve significant estimation uncertainty and may warrant lower specific materiality.
Revenue recognition for health insurance contracts and patient billing arrangements can be complex.
Regulatory compliance costs and potential penalties may be qualitatively material given reputational sensitivity.
ISA 320.10 — Determine materiality for the financial statements as a whole when establishing the overall audit strategy.
ISA 320.11 — Determine performance materiality for assessing risks and determining further audit procedures.
ISA 320.A4 — Common benchmarks: PBT, revenue, gross profit, total expenses, total equity, or net asset value.