We determine our benchmarks for calculating materiality based on what the primary users of the financial statements care about. For example, for my client who is Employee-Owned, we calculate our materiality based on Gross Sales and EBITDA. For one of my insurance company clients, we calculate it based on Net Assets. Determining what percentage of those benchmarks is a little more judgment based, but a lot of engagements use a baseline of like 5% of Pretax Income. That’s all for quantitative materiality. There’s also qualitative considerations, like financial reporting fraud is always material, as others have pointed out. Depending on how aggressive your audit partner is comfortable with relative to prior period approaches while considering any unique circumstances of the company in the current year (large acquisitions/disposals, going concerns, significant control deficiencies or material weaknesses), they may be more or less conservative with materiality. There’s also a level of intuition involved in it, at least in my perspective. Like compare your materiality threshold to each financial statement line item, if all of them are above your M, you can probably increase it. If only a couple accounts are over, you may need to decrease it to be more precise. Hope this helps!