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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › Planning and risk assessment
You are planning the Audit of Veryan Co, a new audit client . Veryan co operates in the oil and gas exploration industry. It has been in existence for 30 years and has grown its revenue at an average of 12% per annum. During your planning meeting you were informed that the forecast profit before tax for this financial year is $9.5m based on revenue of $124m.
Which of the following is the LEAST appropriate materiality level to be used in the audit of Veryan?
Answer ( A)$1.5m
out of ;
B)$1.0m
C) $750,000
D). $450,000
But how do kaplan arrive at the such answer sir ? Could you pls , explain ?
0.5 to 1% revenue = 0.62 to 1.24
5 to 10% revenue = 0.475 to 0.95
B C are within the ranges
D is lower, but could be the performance materiality level as w e are bein g stricter.
A is outside the range, and toomhigh meaning that too little audit work wouod be done.