Elias Tech (ET) is a private company founded by Sarah House and Rosa Perks. Sara and Rosa

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Elias Tech (ET) is a private company founded by Sarah House and Rosa Perks. Sara and Rosa each own a 40 percent interest in the company, with the remaining 20 percent owned by a venture capitalist firm that invests in startups. ET develops medical devices and has recently announced that its revolutionary blood-testing device has received government approval and will be available in the coming year. Revenue and net income information for ET?s last five years are:

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Earlier this calendar year, ET negotiated a $3.5 million term bank loan, which is secured by assets to expand its manufacturing facility. ET is considering going public to help fund the anticipated growth associated with its new blood testing device and, in anticipation of this, has contracted your firm to perform the 2018 audit. A smaller public accounting firm, which does not conduct public company audits, conducted the previous years? audits.a. Based upon case facts, which benchmark is most appropriate for overall materiality?i. Current year?s net income (loss).ii. An average of the last five years? net income (loss).iii. An average of the last five years? revenue.iv. An average of current year?s net assets and revenue.b. Provide an explanation for your choice.c. What benchmark percentage is most appropriate? Use case facts to support your choice.

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Auditing The Art and Science of Assurance Engagements

ISBN: 978-0134613116

14th Canadian edition

Authors: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Joanne C. Jones

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