Section 12: Completing the Audit, Reporting to Management, and External Reporting As such, the unaudited financial statements for the year ended December31,2014 reflect $1,000,000 of tooling expense on the income statement and $330,000 of tooling supplies as current assets on the balance sheet. The approximately $35,000 of tooling supplies on-hand at the end of last year were not included in the $1,000,000 tooling expense recorded in 2014 because those costs were expensed in 2013 under the old accounting policy Because your accounting firm serves as external auditor for Auto Parts, the CFO and the controller asked your firm for advice on whether the Company would be required to account for and disclose the accounting policy change as a change in accounting principle, a change in estimate, or an error correction. In the client's opinion, the change is not material to the financial statements and, therefore, would not require disclosure in the 2014 financial statements. The client strongly prefers to not make any disclosure related to the policy change, as such the 2013 comparative statements would not be adjusted and the 2014 statements would simply reflect the new policy (i.e., in 2014 there would be a decrease in expense and increase in other current assets relative to the prior accounting policy) without the added attention of a disclosure REQUIRED [11 Describe whether you agree that capitalization of the tooling supplies is the preferable method of accounting for Auto Parts, Inc. [21 In general, how do auditors develop an estimate of financial statement materiality? For Auto Parts, Inc., what is your estimate of financial statement materiality? Are there qualitative factors that might impact your decision about the materiality of the accounting treatment and the related disclosure? [31 Assuming the policy change is considered material, how should it be reported and disclosed in the 2014 financial statements and what would be the effect, if any, of the accounting change on the auditor's report? 41 Do you concur with management's assessment that the accounting change is immaterial and, therefore, requires no disclosure? Why or why not