Sparkle & Associates (Sparkle) are the auditors of Diamond Ltd (Diamond) for the year ended 30 June 2017. Diamond is a listed entity that specialises in the wholesale of scientific equipment in Australia. The following materiality guidelines are used by Sparkle to assess audit issues:

? Less than 5% = Not material (i.e. immaterial)

? Between 5%-10% = Auditor to use judgement in determining whether material

? More than 10% = Material

cash 960000

accounts receivable 3100000

inventory 2500000

current assets 6560000

equipment 4100000

total assets 10660000

accounts payable 1700000

accruals 500000

current liabilities 2200000

non-current liabilities 7000000

total liabilities 9200000

owners's equity 1460000

liabilities and equity 10660000

profit before income tax 975000

A review of the audit working papers has revealed the following issues. (i)

Problems with inappropriate cut-off of expenses at year-end have resulted in an invoice for security services for June of $35,000 not being recognised.

(ii)

Due to technology obsolescence, the equipment balance is overstated by $45,000.

(iii)

The testing of overdue debtors balances uncovered:

- $41,000 was received prior to year-end, but not processed/recorded.

- $25,000 was not recoverable but had not been written off.

Required:

In accordance with Sparkle's materiality guidelines, determine whether the financial report is materially misstated as a result of the above issues, both individually and in aggregate. Discuss and show your workings as well as your conclusions.