In this mini-case you will determine overall materiality as well as tolerable misstatement amounts for balance sheet accounts of EarthWear Clothiers, Inc. Most auditing firms use a simple approach for establishing planning materiality and tolerable misstatement similar to the one illustrated in your textbook. This case illustrates such an approach, with some additional guidance from Willis & Adams relating to the amount of tolerable misstatement to allocate to various balance sheet accounts based on difficulty to audit and expected misstatement, and limiting the total amount of tolerable misstatement to about ten times materiality.

INSTRUCTIONS: Please download the files below to complete the audit tasks associated with this mini-case. The Excel workbook contains the instructions and workpapers you are to complete.

11e_Ch3_Mini_case_Materiality

Materiality Guidelines

Using your completed Excel file, answer the questions presented below.

The fields below will be populated automatically as you complete the assigned workpapers. You may need to resize the rows to display your complete answer. Input your responses below into Connect.

Measurement Base Factors _____________________

that you considered to determine the appropriate measurement base

__________________________________________________

Percentage Applied % ____________________ (Round your answer to 1 decimal place.)

Factors that you considered to determine the appropriate percentage applied

_______________________________________

Planning Materiality $

Total Amount of Tolerable Misstatement Allocated To Balance Sheet Accounts $

Ratio of Total Tolerable Misstatement to Planning Materiality

EARTHWEAR CLOTHIERS Planning Materiality December 31, 2022 \begin{tabular}{|c|} \hline 37 \\ \hline Initial Here \\ \hline 1/25/23 \\ \hline \end{tabular} (Mn thousends) 2. Establish Planning Materially Level Moasurement Base Select Measurement Base Using The Yollow Coll on the Loft Bases and Percentage Ranges: Duff rantad Fattibe Phase use tha tomplaze h corpencton wet Wis 8 Adams Mxarhatly Quodines. The materaliy factors provided are guidihes only and should be used only as an ald as you use prolessional jobgent to determine pirring materaliy. 3. JustifyiSupport Your Level of Planning Materialliy Sate the factors that you considered to detemine the approprate measurement base and percentage to detemne planning materially. Mocaten af Wireraip: Tainwe Maishere Decertiou 31, 2 thal pencarty ate EARTHWEAR CLOTHIERS EARTHWEAR CLOTHIERS Consolidated Statements of Operations EARTHWEAR CLOTHIERS Consolidated Statements of Cash Flows EARTHWEAR CLOTHIERS Five-Year Consolidatad Finaneial Summars funaudited EARTHWEAR CLOTHIERS Planning Materiality December 31, 2022 \begin{tabular}{|c|} \hline 37 \\ \hline Initial Here \\ \hline 1/25/23 \\ \hline \end{tabular} (Mn thousends) 2. Establish Planning Materially Level Moasurement Base Select Measurement Base Using The Yollow Coll on the Loft Bases and Percentage Ranges: Duff rantad Fattibe Phase use tha tomplaze h corpencton wet Wis 8 Adams Mxarhatly Quodines. The materaliy factors provided are guidihes only and should be used only as an ald as you use prolessional jobgent to determine pirring materaliy. 3. JustifyiSupport Your Level of Planning Materialliy Sate the factors that you considered to detemine the approprate measurement base and percentage to detemne planning materially. Mocaten af Wireraip: Tainwe Maishere Decertiou 31, 2 thal pencarty ate EARTHWEAR CLOTHIERS EARTHWEAR CLOTHIERS Consolidated Statements of Operations EARTHWEAR CLOTHIERS Consolidated Statements of Cash Flows EARTHWEAR CLOTHIERS Five-Year Consolidatad Finaneial Summars funaudited