What is Performance materiality?
A working threshold that the auditor sets below materiality for the financial statements as a whole. According to the definition in ISA 320, its purpose is to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. The reason is simple: the auditor tests each item separately, while small errors can add up to a large amount. That is why work on individual accounts and classes of transactions is done with a lower threshold, leaving a "buffer". Where necessary, performance materiality is also set separately for particular classes of transactions, account balances or disclosures. Its amount depends on the auditor's professional judgement.
Source: 320-son AXS (ISA 320), 9-band; IAASB: 2013 Handbook (ISA 320)