MATERIALITY: Consider examples (in this chapter) for Basil Ltd. What would be the effects on overall materiality, the base used for overall materiality, disaggregation decisions or tolerable misstatement (if any) for each of the following independent decisions:

a Net sales turns out to be a relatively stable and important account for Basil’s users.

b The inventory value precision is highly important because it will be relied on by a new potential owner.

c The inventory value precision is easier to measure than originally anticipated.

d The cost of sales can be precisely measured along with the inventory balance.
e Long-term debt values are not being relied on by anyone known to the auditor.
Use the following case for the next three exercises:
As the auditor conducting the financial statement audit for her client, Interface Ltd, Leanne discovers indications that a manager is possibly overstating the value of sales. They do not appear to misstate any other account. Leanne addresses her concerns to that manager and to his immediate manager, the CEO. Both say that they believe the account has been stated correctly. However, rather than ‘delay the audit’, both managers ask Leanne to reduce the scope of her investigation and conduct an audit of the Statement of Financial Position only.