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ACC 546 Case 12.2 Auto Parts Inc
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Case 12.2 Auto Parts. Inc. – materiality and evaluating accounting
policies and footnote disclosures
[1] Describe whether you agree that capitalization of the tooling supplies
is the preferable method of accounting for Auto Parts, Inc.
[2] In general, how do auditors develop an estimate of financial
statement materiality? For Auto Parts, Inc., what is your estimate of
financial statement materiality? Are there qualitative factors that might
impact your decision about the materiality of the accounting treatment
and the related disclosure?
[3] Assuming the policy change is considered material, how should it be
reported and disclosed in the 2014 financial statements and what would
be the effect, if any, of the accounting change on the auditor’s report?
[4] Do you concur with management’s assessment that the accounting
change is immaterial and, therefore, requires no disclosure? Why or why
not?
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