Materiality

1. Calculate materiality for the following scenario and provide a reason for your materiality value

You have accepted an audit engagement on a client who has just completed their first year in business.

You are in the process of determining the materiality level for this audit based on the following:

Total Assets $4,289,000 Pre-Tax Income $490,000 Revenue $3,000,000

2. Based on your calculation and the information you have on the company what would you set your performance materiality at and what type of risk would this impact and how?