Pictures for Less has engaged Devinson CPA's to audit their complete set of financial statements for the year ended December 31, Year 2. As a manager, you are helping your senior staff, John Jacobs, fill out a materiality worksheet for Pictures for Less. You have referred him to review Devinson CPA's manual on materiality, which is included in the "Devinson Manual" tab. In addition, you have reviewed the planning workpapers, which documented the knowledge of the client's business and notated the following items/notes:

	Low likelihood that there will be uncorrected or undetected misstatements
	Interim revenue as of 06/30/Year 2 is $2,550,000
	Total assets as of 06/30/Year 2 are $4,900,000

Double-click on the shaded cell to select the benchmark factor utilized. For the preliminary planning materiality and tolerable misstatement cells, input the correct dollar amount.

Worksheet for Determining Financial Statement Materiality

Ben

Pictures for Less has engaged Devinson CPA's to audit their complete set of financial statements for the year ended December 31, Year 2. As a manager, you are helping your senior staff, John Jacobs, fill out a materiality worksheet for Pictures for Less. You have referred him to review Devinson CPA's manual on materiality, which is included in the "Devinson Manual" tab. In addition, you have reviewed the planning workpapers, which documented the knowledge of the client's business and notated the following items/notes:

	Low likelihood that there will be uncorrected or undetected misstatements
	Interim revenue as of 06/30/Year 2 is $2,550,000
	Total assets as of 06/30/Year 2 are $4,900,000

Double-click on the shaded cell to select the benchmark factor utilized. For the preliminary planning materiality and tolerable misstatement cells, input the correct dollar amount.

Worksheet for Determining Financial Statement Materiality

Benchmark factor utilized: ( answer)

Preliminary planning materiality : answer

Tolerabble misstatment: answer

Contect

1.	Materiality should be based on either total assets or total revenue, whichever is lower.
1a.	If annual revenue is not available, then the auditor should annualize revenue.
2.	Materiality is calculated by taking the benchmark amount and multiplying it by the appropriate materiality percentage as shown in the Materiality Table below. Materiality should be rounded down to two significant digits.
3.	Tolerable misstatement is calculated by multiplying the rounded materiality for the financial statements as a whole by either 60% (for low likelihood of uncorrected and undetected misstatements) or 70% (for high likelihood of uncorrected and undetected misstatement). Tolerable misstatement should be rounded down to two significant digits.

Materiality Table:

Base Amount	Materiality Percentage
$0$150,000	4.00%
$150,001$450,000	2.00%
$450,001$1,000,000	1.00%
$1,000,001$3,000,000	0.80%
$3,000,001$5,500,000	0.60%
$5,500,001+	0.50%