You are the auditor and are planning the audit for the financial year ending 30 June 2019. In the audit of personnel expenses account, the amount presented on the financial statement is $12,000,000. Clients profit after tax is $4,000,000.

You determine that misstatements on the financial statement level below 7% of profit after tax will be considered immaterial. Calculate the overall materiality. Does this level of materiality apply to the personnel expenses account?