Audit Materiality and Audit Effort: Evidence From Materiality Benchmarks

The Financial Reporting Council is the first auditing standard-setting body to require audit materiality threshold disclosure. Audit thresholds are a function of auditor benchmark choices and percentage rates chosen for benchmarks. This study investigates association between effort thresholds, auditors’ use benchmarks computed based on non-Generally Accepted Accounting Principles (non-GAAP) measures. uses expanded reports 328 FTSE-350 companies with 2015 year-ends. research finds negative (proxied by fees) thresholds. analysis provides new evidence choices. First, it reveals that negatively associated asset rather than other (profit/adjusted profit/revenue) Second, positively non-GAAP benchmarks, indicating auditors spend more time their audits when there unusual events.