3. MATERIALITY

Fox Accountants have been appointed as auditor of Ferret Limited ("Ferret") for the year ended 31 March 2019.Total assets as at that date were $2,000,000, and in the past 4 years, Ferret recorded the following Net Profit before Tax (NPBT).

2019 $(75,000) loss

2018 $300,000 profit

2017 $280,000 profit

2016 $150,000 profit

During the 2019 audit, the auditor identified the following errors:

(i)A deposit of $25,000 was received from a customer on 31 March 2019 for services to be provided in May 2019.This deposit was coded to sales revenue for the period ending 31 March 2019.

(ii)The auditor believes that the provision for obsolete inventory is understated by $10,000.

(iii)Cash at bank is overstated by $3,200.

REQUIRED

Discuss whether the amounts involved are likely to be considered material for the purpose of issuing an auditor's report on Ferret Limited's financial statements.Justify your answers.