Statements of earnings and financial position for Prairie Stores Corporation are shown.

REQUIRED
a. Use professional judgment in determining overall materiality based on revenue, net income before taxes, total assets, and shareholders' equity. Your conclusions should be stated in terms of percentages and dollars.
b. Assume you complete the audit and conclude that fi nancial statement misstatements exceed materiality. What should you do?
c. As discussed in part (b), likely net earnings from continuing operations before income taxes were used as a base for materiality when completing the audit. Discuss why most auditors use before-tax net earnings instead of after-tax net earnings when calculating materiality based on the income statement.

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Statement of Eamings Prairie Stores Corporation For the 52 Weeks Ended March 30, 2015 April 1, 2014 April 1, 2013 Net sales other Income S8 351 149 59 675 8 410 824 $6 601 255 43 186 6 644 441 $5 959 587 52 418 6 012 005 Costs and expenses 5 197 375 2 590 080 64 100 141 62 7 993 217 417 607 196 700 220 970 20 700 S 200 207 Cost of sales Marketing, general, and administrative expenses Provislon for loss on restructured operations Interest expense 4 005 548 2 119 590 3 675 369 1 828 169 46 737 6 171 875 472 566 217 200 255 366 38 546 5 542 084 469 921 214 100 255 821 Eanings from continuing operations before Income taxes Income taxes Eanings from continuing operations Provislon for loss on discontinued operations, net of Income taxes Net eamings S 255 366 S 255 821 Statement of Financial Position Prairie Stores Corporation March 30, 2015 April 1, 2014 Temporary Investments (at cost, which approximates market) Recelvables, less allowances of $16 808 In 2015 and $17 616 In 2014 680 974 443 175 550 407 353 795 Prepald expenses 2254 106 2 018 787 Land, buildings, equipment at cost, less accumulated amortization Investments In amilated companles and sundry assets Goodwll and other Intangble assets Llabllities and Shareholders' Equity Current portion of ong-term debt Accounts and drafts payable Accrued salanes, wages, and vacations Other accrued labilities Including goods and services tax Accrued Income tax lablity Common stock Issued, 51 017 shares In 2015 and 50 992 In 2014 Total llablities and shareholders' equity