Materiality is not a secret formula reserved for audit partners. It is a planning judgment about which misstatements would influence decisions of someone reading the financial statements.
For many privately held Taiwanese companies, auditors begin with a percentage of profit before tax or of revenue when earnings are volatile. The chosen benchmark should be explained in the planning meeting, not buried in working papers.
Owners sometimes worry that a lower materiality means more fees with little benefit. In practice, a tighter threshold usually reflects higher public or lender scrutiny, related-party complexity, or a first-year engagement where history is thin.
Ask which accounts will be tested substantively regardless of materiality — payroll, related-party balances, and revenue cut-off often receive attention because of their inherent risk, not because of size alone.
Documenting management’s view of users (bankers, minority shareholders, group consolidation) helps the engagement team defend the materiality basis if reviewers challenge it later.