- This topic has 4 replies, 3 voices, and was last updated 4 years ago by Ken Garrett.
- You must be logged in to reply to this topic.
Instant Poll - Read and post comments:
Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>
How can we find out the range of preliminary materiality ?
This is covered in the notes and lectures: 0.5 to 1% of turnover etc then reduced to performance materiality.
Thank you for the reply.
Financial Statement Extracts 2014 2013
Revenue 21,960 19,580
Total assets 9,697 7,288
Profit before tax 1,048 248
A suitable range for preliminary materiality is $97,000 $105,000.
How did they find the range?
It is also interesting for me.
Rev .05 – 1% = About 110,000 to 220,000
Total assets 1 – 2% = About 97,000 to 194,000
Profit 5 – 10% = 5,000 – 10,000
So a big range. Of course, you can have zero profit yet lots of revenue and high total assets. Setting the preliminary materiality at, say, 10,000 would probably mean too much testing.
Looking at the other two, I’d probably go for 100,000.
It’s not an exact science!