Answered: You are the associate auditor on this…

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

100%

Company A's balance sheet and income statement for the fiscal year ending 2021 show the following:

- Net Income: $15,000,000

- Total Assets: $75,000,000

- Total Revenue: $200,000,000

- Net Revenue: $50,000,000

You are the associate auditor on this client. Your senior auditor tells you that for Company A, 1.5% is the materiality judgement. Based on the appropriate benchmark identified in Question #1, determine the planning materiality. Show your work.

Your work should look like:

BENCHMARK AMOUNT x MATERIALITY JUDGEMENT = PLANNING MATERIALITY

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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