You are a senior auditor at CPA LLP. This year, your audit client is Burnaby Wholesalers Ltd, a Canadian public listed firm that distributes building materials, hardware, gardening, and related products to retail stores that service the "do-it-yourself" home improvement market. The audit engagement team includes you, one engagement partner, three junior auditors, and two senior auditors. The fiscal year-end under audit is December 31, 2021. Prior to the current fiscal year, Burnaby Wholesalers was audited by another public accounting firm, but the client changed auditors in early June 2021 because management was dissatisfied with the predecessor audit firm's high audit fee and lack of timely service. During the audit of Burnaby Wholesalers, you encounter the following scenarios. Please respond to each scenario and include your discussions in one PDF document.

2. In one of the meetings at the beginning of the audit, the engagement partner and the client's audit committee discussed the materiality and the overall audit plan. The audit committee proposed setting the planning materiality at $2,500,000. In addition, the audit team reviewed Burnaby Wholesalers' opening balance for various accounts. One exception was noted that the client had failed to record accounts payable for $300,000 of inventory items on December 31, 2020, which resulted in a $300,000 (before tax) overstatement of 2020 income. After discussions, the audit team decided not to correct the error as it was deemed to be immaterial and self-correcting, since the liability was paid in 2021. The unaudited financial statements show total assets at year-end of2 $250,000,000, revenues of $300,000,000, and income before taxes of $25,000,000. Please comment on the appropriateness of decisions or judgements made by the client's audit committee and the audit engagement team. (8 marks)