You are an audit manager for your firm. Your firm normally uses a range of .25 to 2% of total assets, depending on the clients industry and other risk factors. Your firm uses 60% of planning materiality to calculate performance materiality for receivables.

Below is key information from the financial statements for your client for the year 2020.

Total assets 25,775, 000

Receivables 750,000

Assume that during the course of the 2020 audit, you find misstatements totaling 79,000 in Receivables

Required

1. Calculate the planning materiality as well as performance materiality for receivables at both 0.25% and 2%, the endpoints of the range that your firms guidance provides for planning materiality.
2. Evaluate the findings at each materiality level
3. Considering your findings above, in a few sentences discuss the importance of setting appropriate materiality levels.