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L3 Notes_Part_9 - Unprofitable engagements Benefits...

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Problem 3-31 Murphy & Johnson is a manufacturer of small motors for lawnmowers, tractors, and snowmobiles. The components of its financial statements are: (1) net income before operations = $ 21 million; (2) total assets = $550 million; and (3) total revenues = $775 million. A. Planning materiality? B. Tolerable Misstatement? During the course of the audit, M&J’s firm detected two misstatements that aggregated to an overstatement of net income of $1.25 million. Evaluate and render your judgment.
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