Q 1) Draft financial statements for ABC Ltd show the following:

Revenue: Rs. 200m

Pre-tax profit: Rs. 16m

Inventory: Rs. 8m

Trade payables: Rs. 6m

The auditor has set materiality level for the financial statements as a whole at 0.5% of revenue. He has

assessed the risk of material misstatement for individual account balances as follows:

Inventory = low risk of material misstatement

Trade payables = high risk of material misstatement

The risk-based weightings applied to overall materiality are 90% factor for low risk balances, 75% for

moderate risk balances and 65% for high risk balances.

Required

Calculate the performance materiality level for inventory and trade payables.