You need to prepare a memo addressing materiality for Apollo Shoes. Remember that the workpapers document that we are following Generally Accepted Auditing Standards. In the memo,
1. Briefly describe independent auditors' concept of materiality.
2. Describe some common relationships and other considerations used by auditors when assessing the dollar amount considered material. In other words, what are some common measures of materiality with respect to income, sales, and total assets?
3. Based upon your professional judgment and your discussion of items 1 and 2 above, determine an amount you consider to be a minimum material misstatement for Apollo Shoes and justify your recommendation in your memo.
We need a memo (GA-6) addressing the potential for fraud for Apollo Shoes. This workpaper is necessary to document that we are following SAS 99 fraud guidance. Some things you might want to include in your memo:
• Have you noticed any "red flags" in either the minutes or your analytic procedures so far?
• Address fraud risk in general terms: types of risk (Remember that improper revenue recognition is always a "red flag."), significance of risk, likelihood of risk (what is the probability of fraud?), pervasiveness or risk (is fraud risk centralized to one function or individual or is it throughout the organization?)
• How might a fraud might be perpetrated and concealed in the entity
• Suggest ways that we might alter our audit approach to address the potential for fraud, such as assignment of personnel, predictability of auditing procedures, and examination of journal entries and other adjustments.