Materiality and the auditor
Sharon Waters is an auditor. Her work at two companies disclosed inappropriate recognition of revenue. Both cases involved dollar amounts in the $100,000 range. In one case. Waters considered the item material and required her client to restate earnings. In the other case, Waters dismissed the misstatement as being immaterial.
Required
Write a memo that explains how a $100,000 misstatement of revenue is acceptable for one company but unacceptable for a different company.
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