Question
Because of the large change in net income, XYZ Auditors benchmarked materiality on total assets instead of net income before taxes. XYZ Auditors have determined
Because of the large change in net income, XYZ Auditors
benchmarked materiality on total assets instead of net income before taxes. XYZ Auditors have
determined that overall materiality is .5% of total assets. From their calculation, overall
materiality is $1,666,667 and performance materiality is 60% of overall materiality, or
$1,000,000. Note that amounts in parentheses on the table on the next page are reductions in the
respective account while positive amounts are increases in the respective account.
Based on the information given above and in the table on the next page, which misstatements, if
any, are material? In one or two brief sentences, justify why the misstatements you select are
material.
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