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B C D E F G H 1 J L M N 0 EARTHWEAR CLOTHIERS Allocation of Materiality: Tolerable Misstatements December 31, 2019 in thousands 3-8 Intrial Hare 2020928 Explanation Large and complex account with mistetement expected.coaly to avail Relawly complex, estimation involved, related to Deferred Income Taxes Relatwoly Nife change from prior year, not difficult to audit 2019 Unaudited Trial Balance $79,359 $8,543 $ $147,693 $15,647 $10,338 $223,736 $97,722 $1,734 $ $10,510 $60,286 $33,600 $24,567 $261 $5,460 $25,719 ($361 $2,173 $361 402 $ ($134,512) Account Name 2018 Cash and cash equivalents $48,97 Receivables, net $12,875 Inventory $122,337 Prepaid expenses $17,772 Deferred income tax benefits S7,132 Property, Plant & Equipment $206,426 Accumulated depreciation and amortization $85,986 Intangibles.net S423 Lines of credit $11,011 Accounts payable & Reserve for returns $68,399 Accrued liabilities & Accrued profit sharing $28,270 Income taxes payable & Deferred income taxes $18,057 Common slock, 28,121 shares issued S261 Donated capital S5480 Additional paid in capital $20.740 Deferred compensation (579) Accumulated other comprehensive income $3,883 Retained earnings $317,907 Treasury stock, 6,546 and 6,706 shares at cost respectvely ($143,950) Total Amount of Tolerable Misstatement Allocated To Balance Sheet Accounts Planning Materiality (from work paper 3.7) Ratio of Total Tolerable Misstatement to Planning Materiality *** Relatively le volume, noldcull do audil vie 3rd party mo Tolerable Misstatement as of Planning Account Materiality Balance 50% 2 29 50% 18% 75% 2% 50% 10% 75% 23% 50% 1% 75% 2% 5% 10% 50% 15% 75% 4% 75% 7% 75% 10% 2% 25% 43% 25% 50% 0% 0% 17% 25% Not Applicable Not Applicable 50% 1% Tolerable Misstatement $1,587 $1,577 S2,368 S1,565 S2,368 $1,578 S2,368 S173 S1,578 $2,368 $2,368 $2.368 $65 S1,385 $1,578 $0 S543 Not Applicable $1,578 $27,397 $3,157 8.7 No change from prior year, easily verified No change from prior year, easily verified Lile change from prior year, no difficulllo audit Nordifol to audit, examine current yearvesting acwly Involves some complex applications of GAAP Not Applicable Lide change from prioryser, not difficult to avait Wilis & Adams Tolerable Misstatement Guidelines Tolerable misstatement should be between 50% and 75% of planning materiality Tolerable misstatement should not exceed 25% of the account balance *** The oral amount of tolerable misstatement allocated to balance sheet accounts should be below ten times materiality in order to limit aggregation risk. The Web-HI Companies te 2018 - (in thousands) 1. Benchmark Data Sales / Revenue Pre-tax income Total assets Materiality Unaudited 2019 $1,019,890 $70,154 $389,428 2018 $950,484 $35,757 $329,959 $1,800 2. Establish Planning Materiality Level Measurement Base Pre-tax income 70,154 Percentage Applied* 4.5% Planning Materiality $3,157 Please use this template in conjunction with Wilis & Adams Materialty Guidelines. The materiality factors provided are guidelines only and should be used only as an aid as you use professional judgment to determine planning materiaity. Bases and Percentage Ranges: Profit Oriented Entities Pre-tax income 3 - 7%* Total Revenue 0.5 -3% Total Assets 0.25 -2% * For public companies, 5% is typically the maxinum. Not-for-Profit Entities Total Revenue 0.5 -3% Total Assets 0.25-2% Mutual Fund Entities Net Asset Value 3-5% 3. Justify/Support Your Level of Planning Materiality State the factors that you considered to determine the appropriate measurement base and percentage to determine planning materiality Measurement Base: Enter your response here Percentage: Enter your response here
