Jessie Lu is a new audit manager with your firm, Rowlands, Marcellin and Khan (RMK).They have been assigned to the audit of Mauro Moldings Limited (MML). MML is family Owned and is seeking bank financing to expand its factory. Sales at MML last year were $ 43 Million.

MML makes decorative moldings such as door casing, baseboards, and crown moldings, duplicating

The look of historical millwork. Business has been growing as more people restore older homes rather than just renovate.

As part of the planning process Jessie visited MML’s factory. They made the following note: “It is

A good thing MML is expanding. There was good and sawdust everywhere. The factory manager told me

That there is so little space they have had to start storing wood in the parking lot. That’s true. I parked right next to what I think was a pile of oak. I asked the new controller, Frank Mauro, about it and he said

They put a trap over each pile if they thought it was going to rain. He also told me that they would be writing up Their property based on the property tax assessment from the town”.

1. Calculate planning materiality and justify your calculation
2. Identify three factors that affect inherent risk regarding Mauro Moldings Limited. For each factor, also state whether it increases or decreases inherent risk.

Answer rating: 100% (QA)

Step 1 The misstatement amount specified by auditors during the planning stage of an audit based on the materiality to financial statements is known as planned materiality The auditor uses planning ma... View the full answer