Audit Materiality and Audit Effort: Evidence From Materiality Benchmarks

Karen-Ann M. Dwyer , Niamh. M. Brennan, Collette Kirwan

Research output: Contribution to journalArticlepeer-review


The Financial Reporting Council is the first auditing standard-setting body to require audit materiality threshold disclosure. Audit materiality thresholds are a function of auditor benchmark choices and percentage rates chosen for the benchmarks. This study investigates the association between audit effort and audit materiality thresholds, auditor benchmark choices and auditors’ use of benchmarks computed based on non-Generally Accepted Accounting Principles (non-GAAP) measures. The study uses expanded audit reports of 328 FTSE-350 companies with 2015 year-ends. The research finds a negative association between audit effort (proxied by audit fees) and audit materiality thresholds. The analysis provides new evidence on the association between audit effort and auditor benchmark choices. First, it reveals that audit effort is negatively associated with asset rather than other (profit/adjusted profit/revenue) benchmark choices. Second, it finds that audit effort is positively associated with non-GAAP benchmarks, indicating that auditors spend more time on their audits when there are unusual events.
Original languageEnglish (Ireland)
JournalAccounting Finance and Governance Review
Publication statusPublished - 05 Sep 2022


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