Gaven Bros. Lair (GBL) is a small barbershop located in the Liberty Village area of Toronto. GBL
Question:
Gaven Bros. Lair (GBL) is a small barbershop located in the Liberty Village area of Toronto. GBL opened four years ago and has built a loyal clientele. GBL's revenue has grown quickly, and for the current year ended June 30, 2021, revenue was $507,850. GBL is one of the many barbershops and hair salons that is 100%-owned by Max Styles Ltd. (Max), a private company with annual consolidated net income of approximately $1,050,000. Although GBL has been able to grow its revenues quickly,the owners of Max are concerned about GBL's profit. GBL's net income for the past year was $55,863, providing a profit margin of 11%, which is lower than Max's normal
profit margin of 17%.Clever LLP has been engaged by Max to perform an audit of Max's June 30, 2021,year-end consolidated financial statements.
Required:
Calculate the overall planning materiality that Clever LLP should use for the audit of Max for the year ended June 30, 2021. Explain the rationale for each aspect of the calculation.
Governmental and Nonprofit Accounting
ISBN: 978-0132751261
10th edition
Authors: Robert Freeman, Craig Shoulders, Gregory Allison, Robert Smi