Part 5 Materiality Considerations (20 pointo) The concept of Materiality is considered when doing audit. It is also referred to in the auditors' report. 1. Define the term "Materiality". 2. The concept of Materiality is considered to have a Qualitative" dimension. Explain what is meant by this term, give an example. 3. There is a relationahip between "materiality" and the amount of audit work (i.e. Subatantive testing or evidence) done on an audit. Complete the following sentence: As materiality goes down, the amount of audit work (substantive testing) . 4. Discuss the Tolerable Miastatement situation shown below. The auditor determines materiality for the company being audited to be Fifteen Thousand Dollara [$15,000]. Tolerable misstatement of Ten Thousand dollars [s10,000] is assigned to each of the following four accounts. Unknown errors in each of the below. Audit work is performed on each accounts are indicated ccount as discussed in class. The client makes any corrections to accounts as suggested by the auditor. After the completion of audit work, the auditor issues an unqualified (.e GOOD) auditors' opinion. Was this the correct opinion? Discuss and show any applicable calculations Unknowm error in account before any audit work is done (all accounts are overstated) Account 17,000 Cash Accounts receivable Prepaid Assets Property, Plant and Equipment 11,000 9,000 3,000