You have just started at Reigns, Rhodes, and Ripley LLP, a CPA firm that operates in the northeastern United States. You and your team are in the planning phase for the audit of MicroPhones Corporation (MC). Through discussions with management your team has learned that MC is launching a new phone package that combines one of their most popular phones and one of their 2-year subscription plans. They are currently considering which phones and subscription plans to combine and include in the package, which will retail for $1,000. They could include phones that sell separately for $800, $875, or $910, and subscription plans that have a monthly fee of $25, $35, or $40. (The full 2-year subscription would be paid up front as part of the $1,000 package.) MC informs your team that the phones cost the organization $525 and the monthly service for the phone costs them $15 per month.
After meeting with management, you noted that management is concerned about how sales of the package will be reflected in its income statement and balance sheet. MC is concerned about how investors view its profitability and leverage. Therefore, your team wants to discuss the risk of material misstatement. Your team has constructed a visualization dashboard to analyze risk.