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Planning Materiality (Amounts that would influence users judgement and…
Planning Materiality (Amounts that would influence users judgement and decisions)
Stable indicators, must mention whether we can even determine whether they are stable, BE EXPLICIT IN YOUR DISCUSSION mention any amounts which are not stable and WHY THEY ARE NOT STABLE
2.Which Statements do we use
Who are the users of our AFS, what numbers do they care about and why
Where do we derive our value from because this is where the most risk is
PPE
Inventory
Which numbers do we want to use?
Current year, not audited so misstated but reflect current year conditions
Prior years, audited so we can trust them but not reflective of current years conditions, so may not include impact of changes
Budgeted are often over estimated and over positive
Structure: Say which numbers you are picking and why (only good things) THEN SAY WHY YOU WOULDN'T PICK THE OTHER NUMBERS
4.Calculate
Gross up any SOCI numbers if not for the full 12 months
%
Net profit: 5-10
Turn over 0.05%-1%
Total assets 1-2%
Total equity 2-5%
Gross profit 1-2%
Conclude on a number and say we are setting materiality at a conservative level