1. The concept of Materiality is considered to have a Quantitative dimension. This was illustrated by: Quantitative materiality equals [Rate] multiplied by a [Base]. Show a possible rate and base.

RATE _________ BASE _____________________

2.The auditor determines materiality for the company being audited to be Thirty Thousand Dollars [$30,000]. Tolerable misstatement of Twenty Thousand dollars [$20,000] is assigned to each of the following five accounts. Unknown errors in each of the accounts are indicated below. Audit work is performed on each account as discussed in class. The client makes any corrections to accounts as suggested by the auditor. After the completion of audit work, the auditor issues an unqualified (i.e. GOOD) auditors opinion. Was this the correct opinion? Discuss and show any applicable calculations.

Account Unknown error in the account before any audit work is done (all accounts are overstated) Cash $ 6,000 Accounts receivable 8,000 Prepaid Assets 18,000 Property, Plant and Equipment 25,000 Intangible Assets 35,000