Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Global Financial Accounting And Reporting Principles And Analysis

Authors: Walter Aerts, Peter Walton

5th Edition

1473767121, 9781473767126

More Books

Students also viewed these Accounting questions