Part One $$ Case Study

Hadi Al$-$ Salman is the manager of the audit of Al$-$Qahtani Holding Group, a public company that

manufactures formed steel subassemblies for other manufacturers. Mr$.$ Hadi is planning the $2022$

audit and is considering an appropriate amount for overall financial statement materiality to be

$$899,018(5\%$ of its total asset$).$ As a result, and after considering the inherent risks associated with

Al$-$Qahtani$$s account receivables, Al$-$Salman has decided to allocate $60\%$ to the account receivables

of Al$-$Qahtani Holding Group business as a tolerable misstatement rate. A summary of the financial

statement's information is shown below the case.

Additional relevant planning information is summarized;

$1.$ Al$-$Qahtani Group has been a client for $4$ years, and Mr$.$ Hadi firm has always had a good

relationship with the company. Management and the accounting people have always been

cooperative, honest, and positive about the audit and financial reporting. No material

misstatements were found in the prior years$$ audits. AL$-$Salman$$s firm has monitored the

relationship carefully, because when the audit was obtained, Abdullah Alqahtani, the CEO, had

the reputation of being a $$high$-$flyer$$ and had been through bankruptcy at an earlier time in his

career.

$2.$ Mr$.$ Abdullah is a controlling manager who makes all the decisions himself. He gives his

employees responsibility, but he doesn't give them enough authority.

$3.$ The industry in which Al$-$Qahtani Holding Group participates has been in a favorable cycle for

the past $10$ years, and that trend is continuing in the current year. Industry profits are reasonably

favorable, and there are no competitive or other apparent threats on the horizon.

Kingdom of Saudi Arabia

Ministry of Education

Imam Abdulrahman Bin Faisal University

College of Business Administration

Department of Accounting

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Group Project

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$4.$ Internal controls for Al$-$Qahtani Holding Group are evaluated as reasonably effective for all

cycles but not strong. Although the clint supports the idea of control, Mr$.$ Hadi has been

disappointed that management has continually rejected his recommendation to improve its

internal audit function.

$5.$ Al$-$Qahtani Holding Group has a contract with its employees that if earnings before taxes,

interest expense, and pension cost exceed $$7\mathrm{.}8$ million for the year, an additional contribution

must be made to the pension fund equal to $5\%$ of the excess.Income Statement

$\backslash$table$[[,\backslash$table$[[$Preliminary$],[31$ Dec. $2022]],\backslash$table$[[$Audited$],[31$ Dec. $2021]]],[$Sales$,$$$43,994,931,$$$32,258,015$