Sparkle amp; Associates (Sparkle) are the auditors of Diamond Ltd (Diamond) for the year ended 30 June 2017. Diamond is a listed entity that...

Required: 

In accordance with Sparkle's materiality guidelines, determine whether the financial report is materially misstated as a result of the above issues, both individually and in aggregate. Discuss and show your workings as well as your conclusions 

Sparkle & Associates (Sparkle) are the auditors of Diamond Ltd (Diamond) for theyear ended 30 June 2017. Diamond is a listed entity that specialises in the wholesaleof scientific equipment in Australia. The following materiality guidelines are used bySparkle to assess audit issues: 0 Less than 5% = Not material (i.e. immaterial)0 Between 5%-10% = Auditor to use judgement in determining whether material 0 More than 10% = Material 5Cash 960 000Accounts receivable 3 100 000Inventory 2 500 000Current assets 6 560 000Equipment 4 100 000Total assets 10 660 000Accounts payable 1 7 00 000Accruals 500 000Current liabilities 2 200 000Non-current liabilities 7 000 000Total liabilities 9 200 000Owners' equity 1 460 000 Liabilities and equity 10 660 000Profit before income tax 975 DOC]A review of the audit working papers has revealed the following issues. (i) Problems with inappropriate cut-off of expenses at year—end have resulted in aninvoice for security services for June of $35,000 not being recognised. (ii) Due to technology obsolescence, the equipment balance is overstated by $45,000. (iii) The testing of overdue debtors balances uncovered: - $41,000 was received prior to year—end, but not processed/recorded.- $25,000 was not recoverable but had not been written off. Reguired: In accordance with Sparkle's materiality guidelines, determine whether the financialreport is materially misstated as a result of the above issues, both individually and inaggregate. Discuss and show your workings as well as your conclusions.