Holiday Cruises, received a loan from the bank of $100,000. The bank provided the loan, but on condition that the company's liquidity ratio was not below 0.1. Now, while conducting the audit, your audit team has learned of this agreement at this time, the liquidity ratio of the company is just above the level of 0.1 and when you review the balance sheet items of 601,000 current assets and current liabilities worth 600,000, however, during the audit it was found that there was a misrepresentation of 3,000 in the account receivable' balance. Here you are required to explain the materiality of this distortion and support your answer with calculations.

Answer rating: 100% (QA)

first of all we must understand what is materiality concept All items that are reasonably likely to ... View the full answer