Computation the preliminary judgment about materiality and allocate to all account

balances in the statement of financial position.

Set materiality at financial statement level (Preliminary Judgment)
5% of Total Assets

= 5% x (RM 8,767,022,000 + RM 1,263,455,000)

= 5% x RM 10,030,477,000
= RM 501,523,850
OR

1% of Equity

= 1% x RM 7,012,830,000
= RM 70,128,300

1% of Equity is chosen as preliminary judgment amount for Astro Malaysia Holding Berhad.
We choose lower preliminary judgment amount as this company seemed risky and want to
use more procedure to verify the account.
Total assets, liabilities and equity

= RM 10,030,477,000 + (RM 252,390,000

+ RM 2,765,257,000) + RM 7,012,830,000
= RM 10,030,477,000 + 3,017,647,000 + RM
7,012,830,000
= RM 20,060,954,000

Tolerable misstatement = Account balance/ (Total Assets + Liabilities + Equity)

x Preliminary judgment
Account of non-current assets
Property, plant and equipment

Tolerable misstatement amount (RM)

537,000/20,060,954,000 x 70,128,300

Investments in subsidiaries

= 1,877.22
7,017,403,000/20,060,954,000 x 70,128,300

Prepayments

= 24,531,163.51
474,000/20,060,954,000 x 70,128,300

Advances to subsidiaries

= 1,656.99
1,642,789,000 /20,060,954,000 x 70,128,300

Derivative financial instruments

= 5,742,797.67
105,819,000,0/20,060,954,000 x 70,128,300
= 369,917.93

Account of current assets

Receivables and prepayments

Tolerable misstatement amount (RM)

20,682,000/20,060,954,000 x 70,128,300

Derivative financial instruments

= 72,299.33
4,950,000/20,060,954,000 x 70,128,300

Advances to subsidiaries

= 17,304.02
154,830,000/20,060,954,000 x 70,128,300

Other investments

= 541,248.67
529,276,000/20,060,954,000 x 70,128,300

Tax recoverable

= 1,850,222.38
352,000/20,060,954,000 x 70,128,300

Deposits, cash and bank balances

= 1,230.51
553,365,000/20,060,954,000 x 70,128,300
=1,934.43

Account of equity
Share Capital

Tolerable misstatement amount (RM)

519,830,000/20,060,954,000 x 70,128,300

Share Premium

= 1,817,201.43
6,165,374,000/20,060,954,000 x 70,128,300

Capital Redemption Reserve

= 21,552,673.79
1,000/20,060,954,000 x 70,128,300

Hedging Reserves

= 3.50
8,256,000/20,060,954,000 x 70,128,300

Fair Value Reserve

= 28,861
240,000/20,060,954,000 x 70,128,300

Share Scheme Reserve

= 838.98
16,922,000/20,060,954,000 x 70,128,300

Retained Earnings

= 59,155.27
302,207,000/20,060,954,000 x 70,128,300
= 1,056,443.44

Account of long-term liabilities

Borrowings

Tolerable misstatement amount (RM)

2,757,818,000/20,060,954,000 x 70,128,300

Derivative financial instruments

= 9,640,672.53
7,439,000/20,060,954,000 x 70,128,300
= 26,004.97

Account of current liabilities

Payables

Tolerable misstatement amount (RM)

4,411,000/20,060,954,000 x 70,128,300

Derivative financial instruments

= 15,419.80
3,249,000/20,060,954,000 x 70,128,300

Borrowings

= 11,357.73
244,730,000/20,060,954,000 x 70,128,300
= 855,517.58

Based on the calculation above, the preliminary judgment for this year is RM 68,195,802.68.
Through the preliminary judgment, the tolerable misstatement can be determined. After that,
the tolerable misstatement can be compared with any misstatement value that arise. If the
misstatement value is less than the tolerable misstatement, it can be defined as non-material.
But, if the misstatement value is above than the tolerable misstatement, it is defined as
material and the auditors should take further actions to clarify the issues.