Your firm has recently been engaged as the auditor for Samwiches, a publicly traded restaurant holding company with yearly revenues of $15 billion. You are assigned to the quarterly review engagement in the first quarter after your firm picks up the client. Planning is being conducted for the quarterly review engagement and the first-year audit. In the planning stages of the review, you must determine the materiality threshold for the service revenue account. You begin by discussing materiality with the manager who is planning the audit. She plans a materiality threshold for revenue of $200 million.
Do you think your materiality threshold for revenue for Samwiches quarterly review should be higher or lower than the $200 million threshold used in the audit? Why?