Discuss the correctness of this statement

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Question - You are the audit partner for ABC Partners. Your firm has been newly appointed auditor for ZXC Baking Ltd, a manufacturing entity for wholesale baked goods, for the 30 June 2021 audit. This is your first year auditing this client which you personally acquired as the CEO is your brother in law and the Board of Directors were happy you were able to quote an audit fee 50% less than the other accounting firms who also submitted tenders.

It's the planning phase of the audit and you just became aware that a new competitor of ZXC Baking Ltd entered the market half way through this financial year. Covid has meant that more people are staying home and cooking so sales have declined considerably since the last financial year. At the dinner table the other night your brother in law joked some creative accounting will be necessary to ensure he gets an equal bonus as the previous year.

Required - As the risk is high the $ value of materiality should also be high. Discuss the correctness of this statement.

Reference no: EM133168526

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