You are the audit senior of Messrs. Lim Ali & Co, Chartered Accountants. You have just...

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You are the audit senior of Messrs. Lim Ali & Co, Chartered Accountants. You have just completed the audit testing on the year ended 31 December 2019 financial statements of Skywalker Group Berhad, a manufacturing company. The audit manager has asked you to review the following summary of audit differences in the audit working paper to determine whether there are any misstatements in the accounts: Details of misstatement discovered 1. 2. Overstatement of sales invoices in November 2019 Understatement of depreciation of office equipment Unrecorded salaries and wages up to year-end. 3. 4. Unrecorded interest receivable on bank deposit No. Amount (RM'000) 125 25 71 55 Messrs Lim Ali & Co determines overall materiality at 5% of operating profit before tax, and performance materiality is set at 50% of overall materiality. Skywalker Group's operating profit tax for the year ended 31 December 2019 was RM2,857,000. Required: (a) Auditors consider materiality during the planning and decision phases of the audit process. Discuss the use of materiality by the auditors during both phases of the audit of Skywalker Group Berhad. (b) Based on the case mentioned above, (i) Calculate the overall materiality and performance materiality based on the practice established by Messrs Lim Ali & Co. (ii) Explain the implications of the misstatements, individually and as a whole, as identified by the auditors of Skywalker Group Berhad. (Show workings). You are the audit senior of Messrs. Lim Ali & Co, Chartered Accountants. You have just completed the audit testing on the year ended 31 December 2019 financial statements of Skywalker Group Berhad, a manufacturing company. The audit manager has asked you to review the following summary of audit differences in the audit working paper to determine whether there are any misstatements in the accounts: Details of misstatement discovered 1. 2. Overstatement of sales invoices in November 2019 Understatement of depreciation of office equipment Unrecorded salaries and wages up to year-end. 3. 4. Unrecorded interest receivable on bank deposit No. Amount (RM'000) 125 25 71 55 Messrs Lim Ali & Co determines overall materiality at 5% of operating profit before tax, and performance materiality is set at 50% of overall materiality. Skywalker Group's operating profit tax for the year ended 31 December 2019 was RM2,857,000. Required: (a) Auditors consider materiality during the planning and decision phases of the audit process. Discuss the use of materiality by the auditors during both phases of the audit of Skywalker Group Berhad. (b) Based on the case mentioned above, (i) Calculate the overall materiality and performance materiality based on the practice established by Messrs Lim Ali & Co. (ii) Explain the implications of the misstatements, individually and as a whole, as identified by the auditors of Skywalker Group Berhad. (Show workings).

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a Auditors consider materiality during the planning and decision phases of the audit process Discuss the use of materiality by the auditors during both phases of the audit of Skywalker Group Berhad Du... View the full answer