https://www.coursehero.com/u/file/16902579/ACCG340-S116-Week2-Discussion1/#doc/qa

Auditing Question:

Total assets $24,000,000

Current assets $12,000,000

Inventories $10,000,000

Net assets $18,000,000

Net profit for the period $ 2,000,000

Company tax rate 30%

Required:

In carrying out your year-end work on inventories, you determine that a certain line of inventory is obsolete and that its net realisable value is $180,000 below cost price. Management has refused to write down the value of the inventory. Determine whether the $180,000 related to inventory is material for the purpose of issuing the audit report.

How do you get:

profit before tax: $2,857,000

error amount relative to profit before tax is 6.3%

error amount relative to current assets is 1.5%