Materiality is ultimately a matter of professional judgment. However, during the planning process auditors make a calculation
Question:
Materiality is ultimately a matter of professional judgment. However, during the planning process auditors make a calculation of preliminary materiality based on a benchmark or rule of thumb.
Required:
FastFix is an online retail company that sells a variety of products including groceries, clothing, toys, and home decor and promises delivery within 5 days. The table below has select financial data from 2022, 2023, and 2024. Using this information, calculate overall preliminary materiality using the following rules of thumb:
• 5% of profit before tax
• 1/2% of revenues
• 1% of total assets
Which of these do you think is most appropriate to use for FastFix for 2022, 2023, and 2024, and why?
Step by Step Answer:
Auditing And Assurance Services
ISBN: 9781266796852
9th Edition
Authors: Timothy Louwers, Penelope Bagley, Allen Blay, Jerry Strawser, Jay Thibodeau