Emma's Designs is a for-profit clothing manufacturer. The components of its financial statements are (1) income...

 

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Emma's Designs is a for-profit clothing manufacturer. The components of its financial statements are (1) income before taxes = $3.5 million, (2) total assets = $33 million, and (3) total revenues $95 million. Emma's Designs is considered a moderate-risk audit, but Accounts Receivable is deemed to have a higher risk of misstatement. a. Determine overall materiality and tolerable misstatement. Justify your decisions. = b. During the course of the audit, Emma's CPA firm detected one misstatement in a key customer's Accounts Receivable equal to $90,000. The firm also detected a second misstatement in Cash equal to $10,000. Evaluate the audit findings. Justify your decisions. Emma's Designs is a for-profit clothing manufacturer. The components of its financial statements are (1) income before taxes = $3.5 million, (2) total assets = $33 million, and (3) total revenues $95 million. Emma's Designs is considered a moderate-risk audit, but Accounts Receivable is deemed to have a higher risk of misstatement. a. Determine overall materiality and tolerable misstatement. Justify your decisions. = b. During the course of the audit, Emma's CPA firm detected one misstatement in a key customer's Accounts Receivable equal to $90,000. The firm also detected a second misstatement in Cash equal to $10,000. Evaluate the audit findings. Justify your decisions.

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1 To determine the overall materiality and tolerable misstatement we need to first calculate the preliminary materiality using a benchmark of Emmas De... View the full answer