Paul Osoro
Auditing 405

Chapter 3. Wal-Mart Materiality homework.
In determining materiality for Wal-Mart we will follow the 3 steps.
Determine Overall materiality
Determine Tolerable misstatement
Evaluate audit findings

1. Overall Materiality Wal-Mart
Considering materiality for Wal-Mart, since there are no significant changes/fluctuations in income for the 3 years, I will use income before taxes for year 2012.
Overall materiality 24,398,000x5% = 1,219,000
2. Determine Tolerable Misstatements

Assets

Cash 6,550/193,406= 3.4% anything above 3.4% of 1,219,000 or 41,477 is considered material.
Receivables 5,937/193,406= 3.1% anything above 3.1% of 1,219,000 or 37,420 is considered material.
Inventories 40,714/193,406= 21.1% anything above 21.1% of 1,219,000 or 256,612 is considered material.

Liabilities
Short term borrowing 4,047/193,406= 2.1% anything above 2.1% of 1,219,000 or 25,599 is considered material.
Accounts payable 36,608/193,406= 18.9% anything above 18.9% of 1,219,000 or 230,733 is considered material.
Retained earnings 68,691/193,406= 35.5% anything above 35.5% of 1,219,000 or 432,745 is considered material.

3. Evaluate audit findings

Any amount greater or almost equal to the tolerable misstatements will be investigated and management will be asked to make an adjustment to the affected account.
The sum total of all the misstatements might be higher than the Overall materiality and that’s ok so long as individual balance accounts don’t exceed the tolerable misstatements.
Chapter 3. Exxon Mobil Corp Materiality homework.
In determining materiality for Exxon Corp we will follow the 3 steps.
Determine Overall materiality
Determine Tolerable misstatement
Evaluate audit findings

4. Overall Materiality Wal-Mart
Considering materiality for Exxon, since their income fluctuates for the 3 years given, ill use 5% of the average of their income before taxes for the 3 years.
(73,257+52,959+34,777)/3 = 53,664,000
Overall materiality 53,664,000x5% = 2,683,217.
Therefore when assigning individual balance sheet balance accounts, whatever the %