In the audit of sales account, the amount presented on the financial statement is $5,000,000. You are the auditor and you have determined the level of materiality of sales account to be $50,000.

Required:

a. Based on your understanding, how would the auditor have done to determine this amount (You answer should only explain how the auditor actually does in order to determine this amount).          

b. What does this materiality level of $50,000 mean to the auditor and the audit. Explain in details.           

c. Assuming you have checked the sales account and have detected that client recorded a sale transaction of $40,000 that did not actually occur during the year.  

-  What management assertions is violated (i.e. at risk)

- What would you do if you have determined that this is an error (an unintentional mistake)

- Wwould you do if you have determined that this is intentionally done by the client's sales manager to achieve the sales target. Also indicate the type of fraud in this situation under Australian auditing standards (ASAs).

Answer rating: 100% (QA)

a To determine the level of materiality the auditor would consider several factors including the size and nature of the company the industry in which ... View the full answer