AUDIT QUESTION

Mark Jackson is the manager on the audit team for a new client, Central Companies (CC). CC is a home appliance and lighting retailer specializing in high-end kitchen equipment and specialty light fixtures. The client engaged Marks accounting firm in August 2022 in preparation for the December 31, 2022, audit. From January 2022 onward, CC has consistently paid its inventory suppliers late, well past the suppliers agreed-upon credit terms. Some suppliers are even demanding cash on delivery from CC and no longer extending credit. Mark is also aware from his review of correspondence between CC and its bank that the company has been experiencing cash flow problems since 2021. Discuss how this information impacts Marks assessment of planning materiality for CC.

Note: Please explain your answer thoroughly! Thank you in advance for your help.