38. When do I need to determine a materiality level or levels for particular classes of transactions, account balances or disclosures?

Such a materiality level or levels is required when misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Factors that may indicate that this level or levels of materiality are needed include the following:

• Law, regulation or the applicable financial reporting framework affect users' expectations regarding the measurement or disclosure of certain items (for example, related party transactions, and the remuneration of management and those charged with governance).
• There are key financial statement disclosures required in relation to the industry in which the entity operates (for example, research and development costs for a pharmaceutical company).
• Users are likely to focus attention on a particular aspect of the entity's business that is separately disclosed in the financial statements (for example, a newly acquired business).

In considering whether, in the specific circumstances of the entity, such classes of transactions, account balances or disclosures exist, the auditor may find it useful to obtain an understanding of the views and expectations of those charged with governance and management.