You are auditing Jennings Corporation and their pre-tax income is $25,000,000. The general guidelines for determining materiality used by your CPA firm are: Planning materiality: 5% of pre-tax income Tolerable misstatement: 30% of planning materiality During the audit the following misstatements are discovered: Inventory : #320,000 Accounts Receivables: $295,000 Fixed assets: $330,000

Revenue: $365,000 Required: Determine Planning materiality:

Determine Tolerable misstatement:

Evaluate your audit findings and state your conclusion and/or recommendation