2. Materiality is a fundamental concept to risk based auditing. Discuss planning and performance materiality. Clearly describe how each level of materiality is applied. Describe how the benchmark is selected for determining materiality. If total revenue is $63,000,000 and total assets is $26,000,000 and a medium tolerance for misstatement was determined to be appropriate. Use the table below to determine overall planning materiality (tolerable misstatement), performance materiality is determined to be 75% of planning materiality and trivial is set at $2,000.

3. Briefly define a significant deficiency and a material weakness. Explain if/when these would be reported to those charge with governance, under what SAS pronouncement the communication is reported and during what part of the audit the communication should be made.