Question 1 (10 marks)

You were recently appointed as a trainee accountant at Moody & Stephans Inc. (M&S), a medium sized audit firm. During your first week, M&S sent you on a training course at which the importance of determining planning materiality was discussed. The training course addressed ISA 320 specifically. Explain to a friend who could not attend the training course the auditors purpose for setting planning materiality. (5)

1.2 What does the overall audit strategy entail? (5)