In this webinar you will learn how to start a robust materiality assessment process, especially trick and methods how to make it all work. Also, which are the main challenges of materiality assessment within your corporate?
Main points covered:
• How to start a materiality assessment process
• What could be tricks to make it all work?
• What are main challenges to anticipate?
Presenter:
This webinar was presented by Dotun Bolade is a PECB Partner and Certified Trainer. He has over five years’ experience as an environmental scientist. He is the Managing Consultant, EN2SOL PNP LIMITED, where he's involved Energy Innovation, Carbon management, Laboratory automation and management systems consulting.
Link of the recorded session published on YouTube: https://youtu.be/0FaoCQZsBCM
How to align a Robust Materiality Assessment with Corporate Strategy and Target?
1.
2. Dotun Bolade
Managing Consultant
Dotun Bolade, an Analytical Chemist/Environmental Scientist by training
and practice has spent the past five years working in Nigeria’s Oil and Gas
industry. For him, ISO management systems have become second nature
having worked in environments where ISO 9001, 14001, 18001 and 17025
have been fully implemented/accredited. He is a Certified PECB ISO/IEC
17025 Lead Assessor, ISO 14001, 9001 & 29001 Lead Implementer and
Certified Trainer. Dotun is a PECB Partner and Managing Consultant,
EN2SOL PNP LIMITED.
Contact Information
2348066884793
Dotun.bolade@energysolutiosng.com
www.domain.com
linkedin.com/Dotun Bolade
twitter.com/dotunBolade
3. Objectives:
Introduce the concept of materiality
Consider the relationship between materiality
assessment and the new QMS 9001:2015
Emphasize the importance of Materiality
assessment during audit
Discuss materiality assessment as integral to
Risk-based thinking and process approach
4. Content:
What is Materiality?
Frameworks and
Standards for
Materiality
Assessment
Types of Materiality
Three main
Characteristics of
Materiality
Materiality Assessment:
Key steps to establishing a
robust process
Materiality rule of thumb
Misstatements VS
Materiality
Materiality & Risk
Common challenges of the
Materiality Process
5. What is Materiality?
Materiality is the principle of defining the social and
environmental topics that matter most to your business
and your stakeholders.
Materiality is the 1st thing we have to determine in an
audit and that is because next on the line is assessing
risk of material misstatement.
Materiality influences the amount or type of error that
has the potential of changing the decision of a user.
7. What is Materiality?
In setting Materiality
during the audit, the first
step is to set planning
materiality which is the
amount of misstatements
in the financial statement
that would be considered
material.
MATERIALITY – matter for auditor’s professional
judgment.
Auditor’s perception of user needs.
It can be updated
and changed in the
course of the audit
and this requires a
great deal of
professional
judgment.
8.
9. Some Frameworks for Materiality Assessment
IIRC (International Integrated Reporting
Council)Integrated Reporting Framework
GRI (Global Reporting Initiative) G4 Frameworks
Revised ISA 320 on Materiality in Planning and
Performing an Audit
New ISA 450 on evaluating misstatements identified
during the audit
Amendments to ISA 700 dealing with forming an
opinion on the financial statements
10. Types of Materiality
(Based on ISA 320):
Materiality for the financial statements as a
whole
If applicable, materiality levels for particular
classes of transactions, account balance or
disclosures
Performance Materiality
11. Performance Materiality:
An amount or amounts that is less than the
overall level of materiality for the financial
statements as a whole.
Its designed to ensure that at the end of the
engagement, the aggregate of the total,
identified and corrected misstatements and
undetected misstatements will be less than
the overall level of materiality for the
financial statement as a whole.
12. Reasons for determining Performance
Materiality:
To allow for aggregation of
individually immaterial amounts
To provide a margin for possible
undetected misstatements
13. Characteristics of Materiality:
Misstatements considered material when, individually
or in aggregate, they could reasonably be expected to
affect users’ economic decisions based on the
financial statements
Materiality includes both qualitative and quantitative
characteristics. Consider not only the size but also the
nature of the misstatement and the surrounding
circumstances
For general purpose financial statements, what is
considered material depends on the common
information need of a wide variety of users
14. Materiality Rule of Thumb:
5-10% of normalized before tax
earnings
05.-1% of total assets
0.5-5% of shareholders’ equity
0.5-2% of Revenue
15. Misstatements VS Materiality:
If misstatements are greater that
materiality, then there’s one of these three
possible outcomes:
Higher? Client to make adjustment
Higher? Auditor to extend procedures to
isolate errors
Higher? Auditor modifies opinion
16. Materiality Assessment:
A Robust Process
The materiality process can only be maximized when
organizations apply a sustainability/process approach to
business risk, environmental issues, and enterprise risk
management.
There are several assessment toolkits/guidelines,
such as KPMG’s seven step guide. This webinar
examines how this relates to selected clauses of
the ISO 9001:2015 Standard
17. Materiality Assessment:
Define Purpose & Scope
Define the objectives of the materiality assessment.
Identify risks and opportunities (Clause 6.1)
Engage with internal and external stakeholders (Clause
4.2)
Identify future trends that could impact on your
company (Risk-based thinking Clause 6.1)
Consider your audience (Clause 4.2)
18. Materiality Assessment:
Define Purpose & Scope
Define what materiality means for your company by
considering three key questions;
Is the topic of importance to stakeholders? (Clause 4.2)
Does the topic have social, economic or environmental
impact on your value chain (SWOT, PEST Analyses)
Is the topic of strategic relevance to your business
(Clause 8.2.2)
19. Materiality Assessment:
Define Purpose & Scope
Define the organizational scope of material topics:
Consider regions or countries to be assessed (Clause 4.1,
Clause 7.1)
Define parts of your business the assessment will cover
Embed materiality assessment report as part of
performance objectives (Clause 9.1)
20. Materiality Assessment:
Identify potential topics
Create a list of potential material topics based on;
internal data, media reporting, environmental trends
and challenges
Assign responsibility (Clause 5.3)
Consider external stakeholder engagement (Clause
8.2.1)
Establish a continuous process for capturing changes
to relevant issues (Clause 8.5.6)
21. Materiality Assessment:
Categorize
Refine the list of potential material topics by clustering
them into categories; for smaller organizations, this
could be a one-off process
Make sure everyone involved in the process
understands the specific risk or opportunity (Clause
5.3, Clause 6.1)
Connect every material topic to relevant external
trends (PEST Analysis)
Consider interconnectivity of material topics
22. Materiality Assessment:
Gather Information
Gather Information About The Impact And Importance
Of Topics:
Explore each material topic in detail to understand its
relevance to the business and stakeholders
Carry out PEST Analysis of each topic
23. Materiality Assessment:
Prioritize
Prioritize material topics based on the strategic
importance of the business, importance to stakeholders
and the PEST impact of each topic.
Prioritize stakeholder views based on the relative
importance of each stakeholder (Clause 4.2)
Prioritize topics based on impact on corporate values
Develop a scoring methodology to weigh input from
various sources
24. Materiality Assessment:
Engage Management
Test the results of your materiality
assessment with key internal stakeholders
and validate the outcome. (Clause 9.1.3,
Clause 9.3)
Recommend what action the board
should take (Clause 9.3)
25. Materiality Assessment:
Seek stakeholder feedback
Follow up with stakeholders to get
feedback on the material topics reported
(Clause 9.1.2)
Seek to further integrate the results in
company strategy, governance,
operations and reporting (Clause 10.3)
26. Materiality & Risk:
Materiality = magnitude of misstatement
Risk = measure of uncertainty
What is the relationship between materiality and
Inherent and control risk?
In summary, materiality and detection risk move in the
same direction
While detection risk and inherent/control risk move in
opposite directions
27. Common Challenges:
Incorporating and
prioritizing stakeholder
views
Involving senior
management
Extending the materiality
assessment beyond the
company’s own
operations, across the
value chain
The materiality
assessment is isolated
from the rest of the
business
Material topics are too
broad (Defining what is
material)
Stakeholder
engagement
Tick-box mentality
28. PECB Webinar|January 2016 ISO/IEC 17025:2005
Further Clarifications:
dotun.bolade@energysolutionsng.com
oladotunbolade@gmail.com