Please don't give image format and no chatgpt answer Suppose that you are the auditor of amajor retail client who has reportedthe following income before taxes (IBT)for the first two quarters of the year:1st quarter = $1,200,0002nd quarter = $1,500,000You are in the process of establishingoverall materiality for the client. Basedon prior years, the client has a 10%decline in IBT from the 2nd quarter tothe 3rd quarter. You also know IBT inthe 4th quarter historically increases by25% over the 3rd quarter.Determine the amount of overallmateriality for the audit based onthese preliminary amounts.

This question comes under Audit planning and materiality We have to take into account preceding…

Answered: Suppose that you are the auditor of…

Suppose that you are the auditor of major retail client who has reported the following income before taxes for the first two quarters of the year 1st quarter = $1,200,000 2nd quarter = $1,500,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Please don't give image format and no chatgpt answer

Suppose that you are the auditor of a
major retail client who has reported
the following income before taxes (IBT)
for the first two quarters of the year:
1st quarter = $1,200,000
2nd quarter = $1,500,000
You are in the process of establishing
overall materiality for the client. Based
on prior years, the client has a 10%
decline in IBT from the 2nd quarter to
the 3rd quarter. You also know IBT in
the 4th quarter historically increases by
25% over the 3rd quarter.
Determine the amount of overall
materiality for the audit based on
these preliminary amounts.

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