Assume you are a staff accountant working for Kim & Kirkpatrick,

Inc. (K&K), a small publicly traded company that will soon have its

financial statements audited by a local CPA firm, Young, Mitchell,

and Gregory. Eleanor Lee, a rising manager at K&K, expects to work

closely with the auditors. Ms. Lee has a general business background

and several years experience working for K&K, but her knowledge of

auditing is limited. She sees you in the hall one day, and during the

conversation, she tells you she is confused about a term she's heard of

that will somehow affect the upcoming audit. The term she refers to is

materiality. You talk with her briefly about materiality, but as she walks

away she still seems to be a little confused. Later she asks you to write

her a memo explaining the concept of materiality and possible ways it

might affect the audit of K&K.

Write the memo, inventing any details you need to make your

discussion clear and readable.