Please answer all questions.

(b). Explain why the concept of materiality is important for auditors. (word limit 200 words)

(c). This is a theoretical question and independent of the JB Hi Hi audit. Assume Audit Firm X uses 1% of total assets as a base for calculating preliminary materiality. Assume that total assets is $1,000,000 and included in the total assets figure of $1,000,000 is an Inventory account balance of $150,000. As a result of their audit the auditors conclude that inventory in overstated by $16,500 and management refuse to adjust the financial statements to reflect the true situation. Do you think, showing workings, that:

(i) the inventory balance is fairly or unfairly stated? (word limit 100 word); and/or

(ii) the entire financial statements are fairly or unfairly stated? (word limit 100 words).

(iii) What type of audit opinion would your team issue? (word limit 100 words).