One of the clients of MMM Chartered Accountants operates a restaurant. From January ofthe current year, the business has consistently paid its suppliers late, well in excess of thesuppliers' normal credit terms. This has resulted in some suppliers requesting cash on delivery from the business. The auditor has reviewed the correspondence between the business andits bank and finds that the business has been experiencing cash flow problems for two years. Required: (a) Explain why determination of materiality is a matter of auditor judgment. Refer toboth qualitative and quantitative materiality assessments . (b) Explain whether (and, if so, how) the information provided impacts on the auditor'sassessment of preliminary materiality.

One of the clients of MMM Chartered Accountants operates a restaurant. From January ofthe current year, the business has consistently paid its suppliers late, well in excess of thesuppliers' normal credit terms. This has resulted in some suppliers requesting cash on delivery from the business. The auditor has reviewed the correspondence between the business andits bank and finds that the business has been experiencing cash flow problems for two years. Required: (a) Explain why determination of materiality is a matter of auditor judgment. Refer toboth qualitative and quantitative materiality assessments . (b) Explain whether (and, if so, how) the information provided impacts on the auditor'sassessment of preliminary materiality.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter9: Auditing The Revenue Cycle.

Section: Chapter Questions

Problem 40RQSC: Read the following scenario about Strang Corporation and identify the substantive procedures that...

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