Your firm is the auditor of Zhao’s Charity for Pensioners. The charity was formed many years ago from a large gift by the Zhao family, the income from which is used to pay pensions to needy people. The original gift has been invested in fixed-interest investments and shares in listed companies. The trustees manage the charity, and the full-time administrator keeps the accounting and other records.

The draft summarized income and expenditure account for the year ended September 30, 2023, and an extract from the balance sheet are shown below, together with the audited figures for 2022.

The following information has been provided:

1. During the year, some shares were sold at a profit of $182,900 and the proceeds were reinvested in shares of other companies.

2. There were no purchases or sales of fixed-interest investments in the year ended September 30, 2023. In the year ended September 30, 2022, some of the fixed-interest investments were sold and others were purchased using the proceeds of sale.

3. The charity is managed by voluntary trustees who meet four times a year, and the administrator keeps the minutes of the meetings.

4. The administrator keeps the accounting records.

5. As auditor of the charity, you prepare the financial statements from the accounting records kept by the administrator and audit those financial statements. Your auditor’s report is addressed to the trustees of the charity.

Required Describe the audit work you would carry out to verify:

a. Income from investments: your audit tests should verify that all the income from the investments has been received by the charity and included in the financial statements, including dividends from the shares in listed investments bought and sold during the year.

b. The ownership of the fixed-interest investments and shares in listed companies.

Transcribed Image Text:

Income and Expenditure Account for Year Ended September 30 2023 $ Income From fixed-interest investments From shares in listed companies 44,200 123,900 168,100 2022 $ 41,900 123,500 165,400