Government audit materiality (part one): how and why is it different from corporate audit materiality – a theoretical matrix on three materiality differences and corresponding contextual reasons

This research is to explore materiality concept in government audit. Based on a case study on a local government audit office, this research discovers that: in judging material information, government audit differs significantly from corporate audit on three aspects, ‘tight materiality thresholds’, ‘focus on qualitative considerations’, and ‘income and expenditure as materiality-focused subjects’. And furthermore, it argues that these sharp differences result from inherent contextual situations in government audit: pressure from public accountability; high auditor status; power in collecting evidence; and public stakeholder interests. The outcome of the research conveys a message: materiality is contextual. It is uneasy, unreasonable and unnecessary to copy directly from corporate materiality models or guidelines to government audit; rather, the study on governmental context itself is necessary and unavoidable in developing government audit materiality guidelines.