While planning the audit of Vicky King International Enterprises (VKIE), Jane Baldwin, CPA, is evaluating the preliminary levels of audit risk and materiality that should be used. VKIE is a public company in the home construction business. Because of high interest rates, business has been slow this year. Jane noted the following amounts in VKIE’s prior-year financial statements:

Discuss the preliminary levels of audit risk and materiality that Jane should use for planning purposes and the effect of these matters on the amount of audit work Jane would plan to perform. If you would like additional information before establishing these levels, prepare a list of the information desired.

Transcribed Image Text:

Total assets Current assets $75,000,000 35,000,000 Current liabilities 20,000,000 Long-term debt 40,000,000 Stockholders' equity 15,000,000 Sales 65,000,000 Net income 1,000,000