Reference no: EM132950049
In planning every audit, the auditors are required to consider materiality for audit purposes. Described below are financial statement data from two separate companies:
Franklin Co. Tyler Co.
Total assets $34,900,000 $2,700,000
Total revenue 29,600,000 4,500,000
Equity 13,800,000 1,000,000
Net income before taxes 1,600,000 90,000
Required:
Problem 1: Develop an estimate of the appropriate materiality amount for planning for Franklin Co., and describe how you arrived at the estimate.
Problem 2: Develop an estimate of the appropriate materiality amount of planning materiality for Tyler Co., and describe how you arrived at the estimate.
Problem 3: Describe five characteristics of a small misstatement that might render it qualitatively material.
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