Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. an auditor seeks to select the best market approac

An auditor seeks to select the best market approach for the materiality threshold. The auditor...

60.1K

Verified Solution

Question

Accounting

An auditor seeks to select the best market approach for the materiality threshold. The auditor studies Gutierrez et al.'s (2018) investigation into the effects of the materiality threshold on audit quality and decides that this approach is best practice. The auditor decides to use this approach for the financial report as a whole. As, the audit is high risk, the auditor also decides to set a low level of materiality to appropriately reduce the probability that the aggregate misstatement exceeds the materiality threshold. The following financial information is extracted from the clients financial statements: 30 June 2021 30 June 2022 Total Assets $600 million $550 million Total Revenue $480 million $420 million Net Profit $23 million $41 million Use the following table in calculating your answer: Rules of thumb (Materiality) Bases Percentage (%) Net Profit 5 10 Total Revenue 0.5 1 Total Assets 0.5 1 Required: a) Given this information, calculate what the performance materiality and the overall materiality should be for for the audit ended on 30 June 2022 (15 marks) b) Explain why materiality is considered an important concept in auditing

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Advance Math
1.2K views

In this problem, you can use the Matlab program posted on course website and Canvas (also...

Biology
1.2K views

Define the two terms in your own words Absolutism Divine Right 6S 617 verib

Physics
1.2K views

One mole of an ideal gas requires 207 J heat to raise the temperature by...

Geometry
1.2K views

A right triangle has legs of lengths 2cm and 5cm. Find the exact length of...

Geometry
1.2K views

Select the correct answer from each drop down menu The endpoints of AB are A...

Statistics
1.2K views

We learned that with every discrete probability distribution there are two ways to determine if...

Algebra
1.2K views

Question 3 14 3 points Arithmetic Series Find the sum of the finite arithmetic series...

Accounting
1.2K views

Hank Itzek manufactures and sells homemade wine, and he wants to develop a...

Accounting
1.2K views

Alex paid $90,000 for a single-life annuity. He will receive $7,000 per year for 20...

Accounting
1.2K views

Which of following costs should not be included in an assets basis when used in...

Accounting
1.2K views

most of the answers already filled in, just need hep with the wrong abswers and...

Accounting
1.2K views

SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the...