Read the Case Study based on Audit Planning- Cloud 9 Pty Ltd and answer the following question:
Part 1- Materiality
Answer the following question based on the information presented for Cloud 9 in this case study.
(a) Using the 30 September 2011 trial balance (appendix to this case study) calculate planning materiality and include the justification for the basis that you have used for your calculation.
Part 2- Analytical Procedures
Answer the following questions based on the information presented for Cloud 9 in the case study.
(a) Using analytical procedures and the information provided in the appendix, perform an analysis of Cloud 9’s financial position and its business risks. Discuss the ratios indicating a significant or an unexpected fluctuation.
(b) Prepare a common-size statement for the balance sheet of Cloud 9, use total assets as the basis for the balance sheet. Comment on any audit implications revealed by your statement.
(c) Which specific areas do you believe should receive special emphasis during your audit? Consider your discussion of the analytical procedures results, comments on the common-size statement and as well as your preliminary estimate of materiality.
Prepare a memorandum to Suzie Pickering, Audit Senior, outlining potential problems areas (that is, where possible material misstatements in the financial report exist) and any other special concerns (for example, going concern). Specify the accounts and
related assertions that would require particular attention.