You are an auditor in public accounting firm and you are auditing the client's financial statements. Your client is finance company which provide credit for home appliance equipment purchase to end...

You are an auditor in public accounting firm and you are auditing the client's financial statements. Your client is finance company which provide credit for home appliance equipment purchase to end users. You know certainty that the identified user of the financial statement is the bank who has been the client creditors for several years. Client take a bank loan to financing their business and working capital. Client use the account receivable originally from credit sales as collateral to bank loan. When you audit account receivable materiality is set at 5%, after you have finish the audit procedures, there are found misstatements on this account receivable, and the total misstatement is 3%.

What is your decision about this finding, will you conclude this as material or not? Explain the concept of materiality in this case!