6) Materiality Mini-Case: You are the auditor of Blue Leash Brewing, a locally owned beer company...

Transcribed Image Text:

6) Materiality Mini-Case: You are the auditor of Blue Leash Brewing, a locally owned beer company in Kamloops. There are two shareholders: Brent and Bill, who are both involved in the day to day operations. Neither have other sources of income. The business started with a small loan from a local credit union which has a small outstanding balance. Despite continued local revenue growth, the company roughly breaks even each year. In order to continue expanding the business and generate regular profits, Blue Leash is going to request a large loan from a big national bank next year. This will allow them to purchase new equipment and double their output. Selected financial information is presented below: Revenues Cost of Goods Sold Net Income Total Assets Total Liabilities $1,400,000 950,000 7,000 680,000 595,000 REQUIRED: a) Discuss and calculate an appropriate materiality for Blue Leash. (STATE A DOLLAR, not just a %). 6) Materiality Mini-Case: You are the auditor of Blue Leash Brewing, a locally owned beer company in Kamloops. There are two shareholders: Brent and Bill, who are both involved in the day to day operations. Neither have other sources of income. The business started with a small loan from a local credit union which has a small outstanding balance. Despite continued local revenue growth, the company roughly breaks even each year. In order to continue expanding the business and generate regular profits, Blue Leash is going to request a large loan from a big national bank next year. This will allow them to purchase new equipment and double their output. Selected financial information is presented below: Revenues Cost of Goods Sold Net Income Total Assets Total Liabilities $1,400,000 950,000 7,000 680,000 595,000 REQUIRED: a) Discuss and calculate an appropriate materiality for Blue Leash. (STATE A DOLLAR, not just a %).