3-31 scenario 2.........

LO 3-11, L 3-12 3-31 For each of the following scenarios, perform the three steps in the materiality process: ( 1 ) determine overall materiality, (2) determine tolerable misstatement, and (3) evaluate the audit findings. Scenario 1: (2) total aluate Scenario 2: Delta Investments provides a group of mutual funds for investors. The components of its financial statements are (1) income before taxes = $40 million, (2) total assets = $4.3 billion, and (3) total revenues = $900 million. a. Determine overall materiality, and determine tolerable misstatement. Justify your decisions. b. During the course of the audit, Delta's CPA firm detected two misstatements that aggregated to an overstatement of income of $5.75 million. Evaluate the audit findings. Justify your decisions