Calculate the maximum possible error

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Question - During the planning stage of the audit of Helman Inc., the planning materiality was set at $150,000. All fieldwork is now completed and the manager is reviewing the individual and aggregate misstatements identified during the audit to evaluate the effect on the financial statements and possibly the audit opinion. The audit revealed $35,000 of identified misstatements which have NOT been adjusted by the client. It is likely that another $35,000 of misstatements remains unidentified after the audit fieldwork. Also, limitations on audit testing would indicate a possible $40,000 of further misstatements.

a) Calculate the maximum possible error.

b) Explain any implications the results might have on the audit and audit opinion assuming that the identified misstatements have NOT been corrected by the client.

c) Now assume that the planning materiality was set at $100,000 instead of $150,000. Explain the implications for the audit opinion. Give two examples of actions the auditor could take in this instance.

Reference no: EM133019064

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