Palm Industries Co (Palm) Palms year-end was 31 March 2015 and the draft financial statements show revenue of $282 million, receivables of $56 million and profit before tax of $48 million. The fieldwork stage for this audit has been completed. A customer of Palm owed an amount of $350,000 at the year-end. Testing of receivables in April highlighted that no amounts had been paid to Palm from this customer as they were disputing the quality of certain goods received from Palm. The finance director is confident the issue will be resolved and no allowance for receivables was made with regards to this balance.

(I) Discuss if receivables is material if materiality is computed on the following basis;

5% of pretax income 1/2% of total assets 1% of equity 1/2% of total revenues