If you planned on using profit before tax as the benchmark to compute overall materiality and performance materiality, how would you compute those amounts for 2013? Prepare and justify your calculations.
Determine overall materiality and performance materiality using either total assets or total revenues as the benchmark. Make the calculations by utilizing both 0.25 per cent and 2 percent, the endpoints of the range that your firm guidance provides.
Assume that during the course of the 2013 audit you discovered misstatements totaling €50 million (approximately 50 per cent of the 2013 profit before tax of €105 million).
Discuss whether this amount of misstatement is material given your benchmark calculations from parts a and b above.