LO 3-11, 3-12 3-33 For each of the following scenarios, perform the three steps in the materiality process: (1) determine overall materiality, (2) determine tolerable misstatement, and (3) evaluate the audit findings. Scenario 1: Murphy & Johnson is a privately owned manufacturer of small motors for lawnmowers, tractors, and snowmobiles. The components of its financial statements are (1) income before taxes - $21 million, (2) total assets - $550 million, and (3) total revenues $775 million. a. Determine overall materiality, and determine tolerable misstatement. Justify your decisions. b. During the course of the audit, Murphy & Johnson's CPA firm detected two misstatements that aggregated to an overstatement of income of $1.25 million. Evaluate the audit findings. Justify your decisions.