2. Green Storage plc (Green) is a UK quoted company which runs self-storage facilities in the UK. The following information has been extracted from the draft financial statements of Purple for the year ended 30 April 2019. Materiality has been set at £3 million profit and loss balances and £9 million for balance sheet balances.

Extract from the accounting policies

Revenue Recognition: Self-storage income is recognised over the period for which the storage room is occupied by the customer on a straight-line basis. The opening offer discount of 50% off for up to 8 weeks is spread evenly over the term of the discount period.

Other storage related income comprises:

 Insurance income which is recognised on a straight-line basis over the period a customer occupies their room; and

 Packing material sales are recognised at the point of sale as there is not further ongoing performance obligation beyond the point of sale.

Extracts from the notes to the financial statements

Required

a) Explain what is meant by materiality and how the two figures of materiality for Green would have been arrived at and used by the auditors.

b) Describe the audit work that will be carried out in respect of Green’s revenue.

c) Discuss the audit work that will be carried out in respect of Green’s receivables balances.