You have been assigned to audit the Fair Value measurements of Wastch Corporations investments. Wasatch Corporation has two assets that have been recorded at fair value. The total value of the assets is $34.2 million, or approximately 15% of total assets at 12/31/20.

Financial Asset Type	Fair Value at 12/31/20
Municipal Bond, San Marco TX (4% coupon, 12/21/2020 maturity, A Rated	$10,162,000
Intangible Asset- Broadcast License	$24,034,209

Bond: The bond is classified as available-for-sale but for this type of bond there is a negotiated market with no central exchange (inactive market) and was valued by a third-party source using matrix pricing. Wasatch management does not understand matrix pricing and accepted the valuation amount without question.

Intangible Asset: Wasatch acquired B Company and the primary asset of Company B is a broadcast license. Management of Wasatch bought B Company for the broadcast license in hopes of gaining market share elsewhere in the world. But, they recently decided not to pursue broadcasting after all. Management has not evaluated the broadcast license for impairment since it was acquired as part of a business combination two years ago- at that time the license was valued by a third-party valuation firm.

Other: You reviewed the compensation contracts for key employees and if Wasatch records an asset impairment loss top management will not make bonuses this year.

1. Assess the risk of material misstatement (RoMM) and explain why.
2. Determine how you might design an auditing testing approach
3. Briefly describe any issues regarding managements valuation approach or assumptions used
4. Determine the proper level within the fair value hierarchy for each fair value measurement
5. As the audit team, draft a memo to Wasatch Management explaining why you assigned the level(I II III) to each asset and clearly explain how the valuation was completed.