Following are statements of earnings and financial position for Wexler Industries.

Required
a. Use professional judgment in deciding on the preliminary judgment about materiality for earnings, current assets, current liabilities, and total assets. Your conclusions should be stated in terms of percents and dollars.
b. Assume that you define materiality for the financial statements as a whole as a combined misstatement of earnings from continuing operations before income taxes of 5%. Also assume that you believe there is an equal likelihood of a misstatement of every account in the financial statements, and each misstatement is likely to result in an overstatement of earnings. Allocate materiality to these financial statements as you consider appropriate.
c. As discussed in part b., net earnings from continuing operations before income taxes was used as a base for calculating materiality for the Wexler Industries audit. Discuss why most auditors use before-tax net earnings instead of after-tax net earnings when calculating materiality based on the income statement.
d. Now assume that you have decided to allocate 75% of your preliminary judgment to accounts receivable, inventories, and accounts payable because you believe all other accounts have a low risk of material misstatement. How does this affect evidence accumulation on the audit?
e. Assume that you complete the audit and conclude that your preliminary judgment about materiality for current assets, current liabilities, and total assets has been met. The actual estimate of misstatements in earnings exceeds your preliminary judgment. What should you do?

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Consolidated Statements of Earnings Wexler Industries (in Thousands) For the Year Ended March 31,2016 March 31,2015 March 31,2014 Revenue Net sales Other income $ 8,351,149 59,675 8,410,824 $6,601,255 43,186 6,644,441 $ 5,959,587 6,012,005 Costs and expenses Cost of sales Marketing, general, and administrative 5,197,375 4,005,548 2,119,590 3,675,369 1,828,169 2,590,080 64,100 141,662 expenses Provision for loss on restructured operations 46,737 6,171,875 38,546 5,542,084 Interest expense 7,993,217 For the Year Ended March 31,2016March 31,2015 March 31,2014 Earnings from continuing operations before income taxes hcome taxes Earnings from continuing 469,92 (214,100) 417,607 472,566 (217,200) (196,700) 220,907 20,700) 255,366 255,82 Provision for loss on discontinued operations, net of income taxes Net earnings $25,36 $25.821 $200,207 Consolidated Statements of Financial Position Wexler Industries (in Thousands) Assets March 31,2016 March 31,2015 Current assets Cash Temporary investments, including time S39.683 $37,566 deposits of $65,361 in 2016 and $181,589 23.42 271,639 in 2015 (at cost, which approximates market) and $17,616 in 2015 Finished product Receivables, less allowances of $16,808 in 2016 899.752 759,00 Inventories 680,974 443.175 1,124,149 9,633 57,468 2,254,106 550,407 353.795 904,202 0,468 35,91 2.018,787 Raw materials and supplies Deferred income tax benefits Prepaid expenses Current assets Land, buildings, and equipment, at cost 1,393,902 1,004.455 less accumulated depreciation Investments in affiliated companies 112,938 99.79 $3,860.737 83.455 23.145 $3,129,8472 and sundry assets Goodwill and other intangible assets Total March 31,2016 March 31,2015 Liabilities and Stockholders' Equity Current liabilities Notes payable Current portion of long-term debt Accounts and drafts payable Accrued salaries, wages, and vacations Accrued income taxes Other accrued liabilities Current liabilities Long-term debt Other noncurrent liabilities Deferred income taxes Stockholders' equity Common stock issued, 51,017,755 shares in 2016 $ 280,238 64,594 59,51 2,200 76,479 321.871 1,214,893 730,987 146,687 142,344 s 113,411 12,336 380,395 63,557 89,151 269.672 928,522 390,687 80,586 119,715 51,018 50,992 and 50,992,410 in 2015 Additional paid-in capital Cumulative foreign currency translation adjustment Retained earnings 149,177 (76,572) ,554.170 Common stock held in treasury, at cost, 1.566.598 shares (51,967) ,625,826 $3,860,737 148,584 1,462,723 (51,967) 1610,332 3,129842 Stockholders' equity Total