You have just completed audit testing on the 30 June 2015 accounts of JJJ Ltd, a manufacturing firm. Extracts from the draft financial statements are given below.

The audit manager has asked you to review the following summary of audit differences working paper to determine whether there are any material errors in the financial report.

Required

a. Discuss the differences in the purpose, method of calculation and relative use of judgement of:

i. materiality as used at the planning stage of the audit ii. materiality as used at the final review stage of the audit.

b. Outline the materiality guidelines as described in AASB 1031.

c. Under what circumstances might an error be judged to be material as a result of its nature rather than its amount? Give examples.

d. Are any of the errors in items 1–4 material? In each case explain how you reached your conclusion.

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Current assets $'000 12 095 Non-current assets 8 297 Current liabilities 5 630 Non-current liabilities 4 500 Equity 10 262 Operating profit before tax 2 857 Operating profit after tax 2333