II. Materiality: STUDENT 2 (Name): NOTE: You will need to review the Financial statements provided see file "Exercise #1- Financial Statements- Technology Inc" attached in Blackboard. As it is our first year auditing Technology Inc. and starting the audit we need to determine a few things: Required: 5) What would be a good basis to set materiality (Revenue, Assets, Equity, etc) for Technology Inc.? (Think about the definition of materiality, and what would be important to shareholders- do they care about profitability or how many assets the company has acquired.) (Think about if the company is a non-profit, a start-up, oriented towards building up assets, profitable, etc. Use these factors in your explanation.) (Pick 1 letter and & Explain why.) [EX: B. Net Income because.....] a. Revenue b. Net Income C. Total Assets d. Total Equity 5 6) What percentage (higher percentage or a lower percentage) would you use for the benchmark you selected in Q5 above? (Pick an actual percentage ex: 5% or 1%, or 10%, based on the guidance below.) (EX: 5% of Net Income vs 10% of Net Income)? Explain why? Your choice should be based on the Inherent risk and control risk determined in questions 1-4 above. [Click on one of the boxes below to select your answer, check only one box.] Ja. 5 percent of net income before taxes. b. 10 percent of net income before taxes. c. 12 percent of total assets. d. 1 percent of total assets. Je. 1/ percent of total revenues. Of. 1 percent of total revenues. g. 1 percent of total equity. Oh. Less than 1 percent of total Equity