Field notes
Materiality is not a single percentage
Overall materiality often starts from a benchmark such as profit before tax or revenue, then adjusts for user expectations. A lender focused on net assets may push the team toward a balance-sheet oriented benchmark even when the company prefers a profit measure.
Performance materiality sits below overall materiality so that the aggregate of uncorrected misstatements stays acceptable. That is why an individually small cut-off error can still matter when several similar errors appear.
Clearly trivial thresholds help management know which proposed adjustments will not be pursued. Ask for those thresholds during planning rather than after fieldwork.
If the company operates near a covenant breach, qualitative factors can make a smaller amount material. Discuss covenant headroom early so surprises do not appear in the closing meeting.