Materiality is a concept which is of huge importance in the Audit of an organization. An item which appears in the Financial Statements of an organization can be termed as material if the omission of it from the Financial Statements results in some serious distortion. Likewise, if the same item is mis-stated and that also causes some serious fallacy then such an item is termed as Material.
Materiality is normally the element which governs the overall depth of the audit. Although audit is carried on the basis of a sample of the whole data, but which things are to be looked into depends on their level of materiality. Similarly, the extent of scrutiny of the item is also governed by this element.
To sum it into a few words, it's all about the significance of the item on the overall Financial Statements. If the impact is likely to be significant then we must surely check in sufficient detail.