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Net income before taxes at Roger Company is stable, predictable, and representative of its size. Thus, the auditors at Roger Company calculate materiality to be 5 percent of net income before taxes. Net income before taxes at Roger Company for fiscal 2013 is $1,388,500. Determine materiality for the audit of Roger Company's 2013 financial statements. Use ACL to determine if the reported AR account balance, $487,000, is materially different from the detailed files in Rogers Company AR table.
Problem 1: Define tolerable misstatement as 60 percent of materiality. What might cause differences between the number reported in the financial statements and the details in the file?
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