Company Materiality

XYZs financial statements for 2004 will be consolidated with ABC. Hence we stimulate calculated materiality and tolerable flaw for both XYZ (chief entity) and XYZ consolidated. physicalness Assessment For XYZ (Chief Entity) For Revenue/Expenses, materiality is primed(p) at 1% of total expesnes as per 2003 actual. The reason for using 2003 figures is because the consoldiated 2003 expenses are actually close to 2004 reckon figures. The rationale for choosing total expenses is that XYZ is a budget dependent agency. Hence total budgeted expenses is considered appropriate as terra firma for calculating materiality as users would expect potential misstatement would spend in expenses. XYZ: 1% of 466,014,000 = $4,660,140 For balance Sheet full stops, materiality is determined at 5% of net assets. XYZ: 5% of 59,211,000 = $2,960,550 (Note: materiality whitethorn be influenced by considerations relating to individual account balances, such as legal and regulatory requirements. For example the expected degree of verity of note disclosures (e.g. executive remuneration, commitment notes etc) will make convening materiality irrelevant (qualitative materiality).

Tolerable Error Assessment for XYZ (Chief Entity) ground on prior history with the agency and the number and quatum of unadjusted hallucinations in 2003, it is consdered appropriate to set the following tolerate error % of our materiality assessment: Revenue and Expenses (In 2003, there werent many audit adjustments and control risks was assessed as medium. Hence in 2004, our tolerable error is purposely set close to our materiality): XYZ: 95% of $4,6610,140m = $4,427,133 (For example, sample surface of it for substantive test purposes for supplier expense line item as per 2003 budget paper would be $118m/4.4m = 27. This sample surface has been calculated not taking consideration of stratification, which we will whole tone at final visit to see if sample size can be further reduced by stratification.) Balance Sheet Items (in 2003, there... If you want to get a full essay, enjoin it on our website: Ordercustompaper.com

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