Based on the audit risk, the auditor will select a value inside this range. 0.5% to 1% of gross revenue; 1% to 2% of total assets; 1% to 2% of gross profit; 2% to 5% of shareholders' equity; 5% to 10% of net profit. These ranges can also be combined into blended methods. Other, unverified methods A concave function, such as the "gauge" formula. Gauge is a measure of materiality that experiences a decreasing returns to scale as opposed to the other traditional quantitative metrics aforementioned. The concave nature of the function leads to a lower materiality threshold (which implies less tolerance for misstatement) as the company becomes larger because more users are relying on the financial statements. Although the formula varies, a typical structure is as follows: where... a non-zero, non-negative constant; usually a constant that is between zero and one, i.e. for each asset or revenue account, transaction, etc. Materiality, if quantified in any of the above ways, is a function of company size as measured by assets and revenues: the larger the company, the larger materiality limit. Using different means to quantify materiality causes inconsistency in materiality thresholds. Since "planning materiality" should affect the scope of both tests of controls and substantive tests, such differences might be of importance. Two different auditors auditing even the same entity might generate differing scopes of audit procedures, solely based on the "planning materiality" definition used. Materiality in governmental auditing Materiality in governmental auditing is different from materiality in private sector auditing for several reasons. Most importantly, due to the format of state and local government financial statements under GAAP, the AICPA Audit Guide for State and Local Governments requires auditors to consider materiality by "opinion unit" rather than for the financial statements taken as a whole. The Guide defines opinion units as follows: Government-wide level (three units): Governmental activities; Business type activities; and Discretely presented component units in the aggregate. Fund level (at least two): Talatech Inc General fund (always a major fund); Other major funds determined for government funds or enterprise funds. Each major fund is an opinion unit. If there are no major funds, then there will be only two opinion units—the general fund and the remaining fund information; and Remaining fund information, consisting of all other nonmajor governmental and enterprise funds, internal service fund type, and fiduciary fund type. (This will generally always be present, although the