Refer to the Total Performance Materiality Assigned in WP 2-2. Explain why the auditor would allocate more than the Computed Overall Planning Materiality amount (see WP 2-1) to the set of financial statement accounts. In other words, why would auditors permit the Total Performance Materiality Allocated amount to be greater than the Computed Overall Planning Materiality amount?
Assume the audit engagement team determined performance materiality to be $240,864 for each account above (note that this amount will likely not agree with the amounts you determined above). Evaluate each misstatement listed above at the financial statement account level to determine whether or not each would be considered material. Explain your rationale for each misstatement.
Refer to the Summary of Discovered Misstatements (Sales Account) table above. Discuss how offsetting misstatements should be treated when evaluating the materiality of those misstatements.
Assume that the overstatement of the Cash account in this example was intentional. How would this information affect the audit engagement?