One of the clients of MMM Chartered Accountants operates a restaurant. From January of

the current year, the business has consistently paid its suppliers late, well in excess of the

suppliers' normal credit terms. This has resulted in some suppliers requesting cash on delivery

from the business. The auditor has reviewed the correspondence between the business and

its bank and finds that the business has been experiencing cash flow problems for two years.

Required:

(a) Explain why determination of materiality is a matter of auditor judgment. Refer to

both qualitative and quantitative materiality assessments (2 marks).

(b) Explain whether (and, if so, how) the information provided impacts on the auditor's

assessment of preliminary materiality (5 marks). (250 - 300 words)