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

REQUIREDa. 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 financial 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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Prairie Stores Corporation Statement of Earnings For the 52 Weeks Ended April 1, 2017 April 1, 2016 March 30, 2018 Revenue $8 351 149 $6 601 255 Net sales $5 959 587 52 418 Other Income 59 675 43 186 8 410 824 6 644 441 6 012 005 Costs and expenses Cost of sales Marketing, general, and administrative expenses Provision for loss on restructured operations Interest expense 4 005 548 5 197 375 3 675 369 2 590 080 1 828 169 2 119 590 64 100 141 62 46 737 38 546 7 993 217 6 171 875 5 542 084 Eamings from continulng operations before Income taxes Income taxes 417 607 472 566 469 921 196 700 217 200 214 100 Eamings from continulng operations 220 970 255 366 255 821 Provislon for loss on discontinued operations, net of Income taxes 20 700 $ 200 207 $ 255 366 $ 255 821 Net earnings Prairie Stores Corporation Statement of Financial Position Assets March 30, 2018 April 1, 2017 Current assets Cash 39 683 123 421 $ 37 566 271 639 Temporary Investments (at cost, which approximates market) Recelvables, less allowances of $16 808 In 2018 and $17 616 In 2017 899 752 759 001 Inventorles Finished product Raw matenals and supplles 680 974 550 407 443 175 353 795 1 124 149 9 633 57 468 904 202 Deferred Income tax benefits Prepald expenses Total current assets 10 468 35 911 2 254 106 2 018 787 Land, bulldings, equipment at cost, less accumulated amortization Investments In affillated companles and sundry assets Goodwill and other Intangible assets 1 393 902 112 938 99 791 1 004 455 83 455 23 145 Total assets $3 860 737 $3 129 842 Liabilities and Shareholders' Equity Current liabilities $ 280 238 Notes payable Current portion of long-term debt Accounts and drafts payable Accrued salarles, wages, and vacations Accrued Income taxes Other accrued llabllities Including goods and services tax Current llabilities $ 113 411 64 594 12 336 359 511 112 200 380 395 63 557 76 497 89 151 269 672 321 871 1 214 893 730 987 928 522 390 687 Long-tem debt Other noncurrent llabilities 146 687 80 586 142 344 2 234 911 Accrued Income tax llability Total liabilities Shareholders' equlty Common stock Issued, 51 017 shares In 2018 and 50 992 in 2017 Retalned earnings Total shareholders' equlty 119 715 1519 510 200 195 1 425 631 1 625 826 199 576 1 410 756 1 610 332 $3 129 842 Total liabilities and shareholders' equity $3 860 737