How view of preliminary materiality would be altered

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Structural is a manufacturer that sells mainly to the infrastructure construction industry. The national economy is currently static with consumer confidence falling in the last two quarters. The company has an internal audit function that in previous years you have assessed as effective. Your experience with the company in past years has also shown that its forecasts are generally reliable.

Required:

Problem a) Given the information provided, suggest an appropriate benchmark as the starting point for determining preliminary materiality for Structural. Provide reasons for your answer.

Problem b) List the factors you would consider in determining preliminary materiality for the audit for the period ended 30 June 2018, and explain how those factors affect your assessment of materiality.

Problem c) Describe how your view of preliminary materiality would be altered if you discovered that during the year Structural had refinanced its debt with a contractual commitment that requires its debt to equity ratio to be better than 1:1 at all times

Reference no: EM132964586

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