Stephanie is a senior auditor at Hart & Brand CPA firm. This is Hart & Brand’s first year on a new public client, Bellezza Casa. Bellezza Casa is a home and garden specialty retailer that consists of 120 retail locations nationwide and has no subsidiary businesses. This year, Bellezza Casa books show gross profits of $1.2 million, net income of $720 thousand, and total assets of $4.5 million. Stephanie is assigned the task of determining materiality for Bellezza Casa’s financial statements.

1. In which stage of the audit should Stephanie determine overall financial statement materiality and planning materiality for the various accounts?
2. If Stephanie is assigned the task of testing the accounts receivable account during the year-end audit, should she use the same level of materiality she formulated for financial statement materiality? If not, will materiality for accounts receivable be higher or lower? Explain.

  • CreatedJanuary 21, 2015
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