a + ANV OLE easuring Audit Risk Three independent calculations (7 points Each) REQUIRED O MAKE SURE YOU GIVE ME PERCENTAGE o USE TWO (2) DECIMAL PLACES A. MW & Co., CPAs, is planning its audit procedures for its tests of the valuation of inventories of EC Manufacturing Co. The auditors on the engagement have assessed inherent risk and control risk for valuation of inventories at 90% and 40%, respectively. Calculate the appropriate level of detection risk for the audit of this assertion, given that the auditors wish to restrict audit risk for the assertion to 2% Detection Risk = B. The auditors wish to limit the audit risk of material misstatement in the test of inventories to 3 percent. They believe that inherent risk is 95%, and there is a 55% risk that material misstatement could have bypassed the client's system of internal control. What is the maximum detection risk the auditors should specify in their substantive procedures of details of inventories? Detection Risk = C. Auditors have assessed inherent risk for a particular assertion at 65% and control risk at 15%. In addition, they have performed audit procedures that they believe have a 25% risk of falling to detect a material misstatement in the assertion. Calculate the audit risk. Audit Risk = Type here to search e 3 TD of 150 D A using the materianty guidelines below, calculate Cvs materiality. 08 I Materiality CVS 2018 = Materiality CVS 2017= Illustrative Case Materiality Guidelines One of the Big 4 CPA tinims has developed the following table to assist saudit statt in determining planning material ity based on the greater of total assets or total sales If the Greater of Total Assets or Total Revenues is: Materiality is: Over But Not Over Times The Excess Over 50 $ 30,000 0 05900 50 30.000 100.000 1.780 03100 30.000 100.000 300,000 3.970 02140 100,000 300.000 1.000.000 8.300 01450 300.000 1,000,000 3.000.000 18.40001000 1.000.000 3.000.000 10,000,000 38,300 - 00670 3,000,000 10,000,000 30.000.000 85.500- 00460 10.000.000 30,000,000 100.000.000 178.00000313 30.000.000 100,000,000 300.000.000 397.000 - 00214 100,000,000 300,000,000 1.000.000.000 8.26.000.00145 300.000.000 1,000,000,000 3.000.000.000 1.840,000-00100 1,000,000,000 3,000,000,000 10,000,000,000 3.830.000 00067 3.000.000.000 10,000,000,000 30.000.000.000 8.550.000 - 00046 10.000.000.000 30,000,000,000 100.000.000.000 17.800.000 - 00031 30,000,000,000 100,000,000,000 300.000.000.000 39.70000000021 100,000,000,000 300.000.000.000 82.600 000 00015 300,000,000,000 To state application of the table, assume that a company has $12.570.000 of total assets and $20.520.000 of total revenue Planning materiality would be calculated as described belon 585,500 - 0040 (520 520,000 $10,000,000) $183,892 660 3 of 15 a + A 2 S3 UV Consolidated Statements of Operations For the Years Ended December 31, In millions.com 2018 2017 2016 Revenues Products 183,950 $ 180,063 $ 173,377 Premams 8.184 3,538 3,069 Services 1,825 1,144 1,080 Nel investment incamme 21 20 Total revenues 194,579 184 786 177,546 Operating costs Cost of products sold 156,447 153.448 146,533 Bencfit costs 6.594 2,810 2,179 Goodwill impairments 6,149 181 Operating expenses 21,368 18,809 18.448 Total operating conta 190,338 175,248 167,160 Operating income 4,021 9,538 10,386 Interest expense 2.619 1,062 1,078 Loss on carly extinguishment of debt 643 Other expense (income) 208 income before income tax provision 1.406 8.268 8.637 income tax provision 2,002 1,637 3,317 ncome (los) from continuing operations (596) 6,631 Los from discontinued operations net of tax 5,320 (8) Net income (los) (1) (596) Net (income) loss attributable to non controlling interests 6,623 3319 (1) Net income (low) attributable to CVS Health (2) S (594) S 6,622 $ 5,317 s 4.93 Basic camins (los) per share: Income (los) from continuing operations attributable to CVS Health Los from discontinued operations attributable to CVS Health Net income (los) attributable to CVS Health Weighted average basic shares outstanding Diluted earnings doss) per dare Income (los) from continuing operations attributable to CVS Health Loss from discontinued operations attributable to CVS Health Net income (o) muributable to cvs Health Weighted average diluted shares outstanding Dividends declared per share (0.57) $ $ (0.37) 5 1.044 6.48 $ (0,01) 5 6.47 1,020 4.93 1,073 $ 4.91 $ 5 (057) $ s (0.57) S 1,044 2.00 5 6.45 S (0.01) 5 s 1,024 2005 4.90 1,079 1.70 se maine soteste canalidated financial statement Consolidated Balance Sheets At December 31, 2018 2017 1.6.26 111 40395 2.522 17.631 16,450 4581 In million on the Assets Cash and cash equivalents Investments Accounts receivable.net laventories Other comments Totalcune Long-term investments Property and equipment, not Goodwill Intangible asetnet Separate accounts Other Totalt 13,181 15.296 943 31.229 112 10.232 38,451 15,732 11.349 72672 36.524 3.684 5.04 195,456 5 1.417 95.131 925 S 10.355 Liabilities Accounts payable Pharmacy claims and discounts payable Head are copy able Policyholders' funds Accrued expenses Other insurance liabilities Shonte debe Current portion of long-term debe Toral current liabilities Long-term dcbe Deemed income taxe Separate accounts liabilities Other long to insurance liabilities Other long som bildes Teal liabilities Commitments and contingencies (Note 16 5210 2.939 1071 1.937 720 MS 1276 3:545 3064 2995 71.444 7,677 34 19 2.70 137903 1277 57.66 5.440 Shareholdersity CVS Health scholders equity Preferred stock, purval 50:01:01 shares thorned some issued or outstanding Common stock, pwale 0.01:3.200 authorised, 1,720 hard and 1.295 shares tanding December 31, 2018 1.713 har redd 1.014 shares standing at December 31, 2017 and capital surplus Treasury dock, con: 425charest December 31, 2018 and shares December 31, 2017 Raised caring Accumulated other comprehensive incomes) Tou CVS Head shareholders No concelling interest Toul shartholders Tallibilities and shareholders' quality 32.975 07.7% 0.556 (165) 4 37.495 98.01 1456 5 See companying to chated financial alemans