Statement of Financial Position
Fiscal Year				2021	2020
Cash				170	120
Accounts Receivable				5	4
PPE				3	3
Goodwill				90	90
Total Assets				268	217
Accounts Payable				70	50
Other Current Liabilities				40	28
Total Liabilities				110	78
Shareholders' Equity				158	139
Statement of Comprehensive Income
Fiscal Year				2021	2020
Revenue				150	110
Cost of Revenue				30	18
Gross Profit				120	92
Research and development			45		25
Selling, general, and administrative				90	70
Other expenses				15	18
Net income				-30	-21

Guidelines to calculate materiality:

3% to 7% of net income before taxes.

1% to 3% of total assets.

3% to 5% of shareholders equity.

1% to 3% of revenue.

1% to 3% of expenses.

0.5 to 5% of gross profit.

1) Using the guidance and the financial statements above, propose and justify an assessment of the overall materiality level for the 2021 audit of this client.

2) From the elements of the case, propose and justify an assessment of inherent risk for this client (HIGH / MODERATE-HIGH / MODERATE / MODERATE -LOW / LOW) based only on identifying and assessing overall financial statement risks (in other words, you do not need to assess risk of material misstatement at the assertion level at all)

3) What is going to be the planned detection risk (HIGH / MODERATE-HIGH / MODERATE / MODERATE -LOW / LOW) and the quantity of evidence auditors will have to collect for the audit of this client?