Answer

Introduction

The report is based on identifying the basis for materiality for the CGPO and their appropriate percentages to set a threshold for the materiality. In order to draw an analysis on the materiality, the competitor of the company is also analyzed. The data from financial statements is taken to set the percentages. Once the bases of materiality are defined, one appropriate basis is identified which would serve for the complete materiality analysis of the financial statements during the audit engagement. The report also contains the understanding of tolerable misstatement, the methods of identifying and the strengths of weaknesses of those methods. Lastly, the concept of immateriality is explained by the report.

Bases & Percentages for materiality:

The most important consideration for clients of financial statements for profit-oriented businesses is total cash and net assets. Banks generally have a higher rate of total assets and liabilities related to PBTCO. If PBTCO is the right benchmark, total assets can be the decisive metric as consumers focus more on giving the business its size and value.

Insurance companies have a high rate of total assets and liabilities, especially those associated with PBTCOs. The number of goods can be an important metric as customers can focus on it depending on the size and importance of the business (Choudhary, Merkley, & Schipper, 2019). The number of goods can be a criterion as customers can focus on it depending on the size and importance of the business. The value of assets is that the focus of consumers is on businesses such as “profits” that are due to an increase in the value of the underlying assets and therefore the estimated total assets value. 

Data from Financial Statements:

Use of Tesco and appropriate standards to provide guidance

The change in Tesco, which competes with the CGPO, shows that the selected physical base is correct. This shows a major change in the content of the selected statement.

Appropriate Base

I will select the total amount to determine the income during the debt period. Different content parameters are appropriate for each audit date as different industries have different risks, i.e., they are more in one industry and vice versa (Moroney & Trotman, 2016). Furthermore, some companies have different risks due to the history of past mistakes and the financial life of the company in the final year. Different content bases are considered when determining planned content because financial information corresponds to many users with different objectives, so not all parts of financial statements are suitable for all users. Stakeholders will focus more on long-term income and profit growth against the lender (Choudhary, Merkley, & Schipper, 2019).

The balance between the statement of account and the statement of income is affected by many inconsistencies. Therefore, audit should be conducted to identify the slightest error affecting the customers. There is also a need to ensure that financial statements have no physical basis. The risk of fraud is considered when determining the performance of an asset because auditors think that there is a risk of misrepresentation of management’s financial statements and managing accounts with incorrect content.

The discussions of the auditor are influenced by the fact that his industry is becoming more and more open in court. The closer the reporting firm is, the more classified the result will be (less profit / loss), the more sensitive the application will be. Therefore, not only the size of the event, but also the magnitude of its effects, positive / negative (direction) information, sensitivity of the company to the information (share price response) and the impact of the information on the corporate, at default risk (value of creditors). If the investor or the lender (DIS) agrees with the account of the material decisions taken by the debtors, the difference in the stock market value or the plot in the cost of repaying the loan will appear. General negative information has more impact than specific information (Choudhary, Merkley, & Schipper, 2019).

Tolerable Misstatement

A statement of negative loss is a statement of financial position that differs from its actual value without affecting the proper functioning of the overall financial statement. This concept is used by the debtor when designing audit debt procedures for the evaluation of consumer financial statements (Barndt, Fuller, & Flynn, 2016). The selected processes must be able to detect all events outside the tolerable negative statement.

The difficulty recognized by the auditor is the decision call, which is based on the content part of the audit plan. If the apparent risk level is high, the tolerable error becomes a small percentage of planned devices such as 10-10%. On the other hand, if the perceived risk level is low, a very significant error can occur in planning tools such as 70-90% (Barndt, Fuller, & Flynn, 2016).

There may be inconsistent statements in some areas of the financial statement. Taken together, these manipulations can adversely affect financial statements. This is especially true when managers are involved in misrepresenting financial statements so that most unacceptable statements are the same without disturbing them. Fraud, on the other hand, is less likely to occur when various negative statements have a positive or negative effect on it. Tolerable Error – The tolerable measurement of the error guide is a schematic concept, which also helps in the analysis of the evaluation values ​​found in the audit data (Barndt, Fuller, & Flynn, 2016). However, auditor dieter also evaluates whether the problem is important when considering quality factors. Quality consideration is important even if the problem does not extend to the limits of the material. Also, keep in mind that things can change during research. When analyzing the problems found in the audit data, the finder’s conclusions about the content issues are ultimately considered a measure of performance during the planning period. When ICFR defects are identified, auditor determines whether they are severe enough to be classified as a serious defect or physical weakness. Unrealistic statements, whether personal or in combination, need to include customer letters and financial statements so that they are not physically misleading (Barndt, Fuller, & Flynn, 2016).

 Method:

If the apparent risk level is high, the tolerable error becomes a small percentage of planned devices such as 10-10%. On the other hand, if the perceived risk level is low, a very significant error can occur in planning tools such as 70-90%.

Strengths & Weaknesses:

When auditors’ dieters use sampling methods, they face two types of risks. First, if they use examples of this, they do not select the total number of objects and therefore lose objects with operating errors. Therefore, these errors may not be available and may adversely affect the auditor’s decision regarding financial statements (Vîlsănoiu & Buzenche, 2014).

Second, there is a risk of making false statements when they are taken individually, but they can collectively assume that the financial statements are false. These are two difficulties that auditors face but cannot be fully addressed without using the whole thing (Vîlsănoiu & Buzenche, 2014). However, auditors cannot do so for the above reasons.

Therefore, auditors have established a standard by which they consider any inappropriate statement to be tolerable. This is called a tolerable error. In other words, an item in a financial statement is an amount that differs from its actual value without affecting the proper presentation of the overall financial statement. Auditors Dealers use this concept when performing audit deed processes in auditing dating of financial statements.

Immateriality:

Apart from material misstatements which have been addressed earlier, an auditor must seek the immaterial misstatement also and make leads that whether they give rise to bigger misstatements or not, a regular follow up on the immaterial misstatements must be carried out by the auditor in case that it may lead to some material information (Chang, Chen, & Chiao, 2012). When the financial statements are compiled, they give rise to the classification of data. One can record details with own income and expenses that they are concerned about or choose to summarize. One can choose a different approach depending on whether they are compiling a bank statement that they do not know about in the business or about a business advisor.

If the information does not seem so important, the auditor has a choice to leave that information to include in sample testing. However, If one chooses not to include too little in the transaction, then they are choosing a value target rather than an accuracy goal. Ignoring accounting standards and principles is not the same as making decisions based on real-world knowledge.

When making such a decision, it is important that one maintains a clear reason to support one’s choice (Chang, Chen, & Chiao, 2012). If one chooses not to submit information, it should be for the benefit of business and information review agencies such as banks and investors. It makes sense to waive the 0% parking fee as the time it takes to set up and update this information is perfectly reasonable. However, it would be dishonest to leave out details like questionable investments even if one is tempted to improve one’s overall financial picture.

The questions which should be considered skeptically by the auditor are that; Is the information considered too little and is the basis for financial management, strategic and analytical processes? Which categories to choose in your financial statements will depend on your company’s priorities and goals (Chang, Chen, & Chiao, 2012).

Conclusion:

Summarily, it would suffice to say that total revenue base has proved to be a more suitable base for the financial statement materiality analysis of CGPO. Different content parameters are appropriate for each audit date as different industries have different risks, i.e., they are more in one industry and vice versa. Furthermore, some companies have different risks due to the history of past mistakes and the financial life of the company in the final year. Different content bases are considered when determining planned content because financial information corresponds to many users with different objectives, so not all parts of financial statements are suitable for all users. Stakeholders will focus more on long-term income and profit growth against the lender.