Materiality 2012 Case Study

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Materiality 2012 PwC 5% materiality level used for this year’s financial statement reflected from the strong position of the company during 2010. However, due to the increased risk of Chesapeake Energy financial statement, materiality for the 2012 financial statement audit should be set at 2% of earnings before income tax. This preliminary 2% is in result of recent findings that Chesapeake Energy operations, integrity, and financial position has changed since last years audit. The deterioration of the company’s image, financial operations, and additional litigations have increased the risk to the audit and the work the audit team must complete to give an accurate unqualified audit opinion. The preliminary % will be the set materiality threshold, however, the audit team reserve the right to adjust such materiality in the event that new items come to light. Within each account, there will also be different levels of materiality in relation to the perceived risk of each account. Accounts such as cash, accounts receivable, accounts payable, long-term debt, and PP&E will have a higher materiality threshold due to the abundance of evidence to…show more content…
However, this is does not cause too much concerns since he does not sit on any committee. The Audit Committee, however, and all other Board of Directors consist of individuals who are independent to the firm, and holistically, they carry a diverse set of skills and experience consisting of legal, public policy, finance, risk management, technology, energy production, and much more that are vital to the firm. The Audit Committee consists of V. Burns Hargis, Richard K. Davidson, and Merrill A. “Pete” Miller Jr. As mentioned earlier, each of these three audit committee members are independent to the
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