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 __ (Round your answer to 1 decimal place.)