Case 2-3 Abermethy and Chapman Preliminary Judgment about Materiality Client Balance Sheet Date: Prepared by Determine the preliminary judgment about materiality for the client as a whole. Express your answer as a dollar amount. Delermine the appropriale level of materiality based on all analyses completed for the dlient thus far. Fully support and discuss the materiality level that you determine. Quantitative Considerations: Because materiality is relative, it is necessary to have bases for establishing whether misstatements are material A base is a critical item of which users tend to focus while making decisions. The base will vary depending on the nature of the client's business. Typical bases may include net income before taxes, net sales, total assets and stockholders' equity. Percentages typically range from 1%-10% depending on the base Base (from previous year) Percentage Range | Basex Percentage Dollar Amount of Base Qualitative Considerations: Certain types of misstatements are likely to be more important to uSers than others, even if the dollar amounts are the same. For example, misstatements that inolve fraud may be more important to users than misstatements due to unintentional errors. Fraud refiects on the integrity of management and other employees of the dlient. Impact on Matenality (Increase or Decrease) Item to be Considered Preliminary Judgment about Materiality Combine the quantitative and qualitative considerations into one overall materiality level. Matenality leve Disoussion Discuss how you arrived at this dollar amount for the preliminary udgment about matenality. That is, how did you combine the qualitative and quantitative oonsiderations to amve at this dollar amount? Case 2-3 Abermethy and Chapman Preliminary Judgment about Materiality Client Balance Sheet Date: Prepared by Determine the preliminary judgment about materiality for the client as a whole. Express your answer as a dollar amount. Delermine the appropriale level of materiality based on all analyses completed for the dlient thus far. Fully support and discuss the materiality level that you determine. Quantitative Considerations: Because materiality is relative, it is necessary to have bases for establishing whether misstatements are material A base is a critical item of which users tend to focus while making decisions. The base will vary depending on the nature of the client's business. Typical bases may include net income before taxes, net sales, total assets and stockholders' equity. Percentages typically range from 1%-10% depending on the base Base (from previous year) Percentage Range | Basex Percentage Dollar Amount of Base Qualitative Considerations: Certain types of misstatements are likely to be more important to uSers than others, even if the dollar amounts are the same. For example, misstatements that inolve fraud may be more important to users than misstatements due to unintentional errors. Fraud refiects on the integrity of management and other employees of the dlient. Impact on Matenality (Increase or Decrease) Item to be Considered Preliminary Judgment about Materiality Combine the quantitative and qualitative considerations into one overall materiality level. Matenality leve Disoussion Discuss how you arrived at this dollar amount for the preliminary udgment about matenality. That is, how did you combine the qualitative and quantitative oonsiderations to amve at this dollar amount
