Marianne Limited is a company listed on the Hong Kong Stock Exchange and is engaged in the manufacturing and trading of garments.

You are the auditor of Marianne Limited and are performing audit planning for the year. The following financial information has been extracted from the latest management accounts prepared by management.

	9 months for the current year (HK$000)	Last year (HK$000)
Revenue	1,000,000	2,000,000
Profit before tax from continuing operations	500	10,000
Net current assets / (liabilities)	(200)	2,000
Shareholders equity	3,000	5,000

Based on the information provided by Marianne Limited, the profit before tax from continuing operations for the 9 months ended 31 March 2013 includes the following unusual items:

1. Impairment of property, plant and equipment of HK$3,000,000; and

2. Share-based payment expenses on granting one-off share options to a director of

   Marianne Limited of HK$2,000,000.

Required:

Auditors often select a benchmark item from the financial statements and apply a percentage when setting materiality. Propose a possible range of benchmarks and the source documents containing them in the case of Marianne Limited. What are your considerations when you decide a benchmark and the percentage? What documentation you would suggest for such work?