Below is a situation where the accountant of the client has misclassified repairs and maintenance Required...
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Below is a situation where the accountant of the client has misclassified repairs and maintenance Required For each misclassification state the assertions at risk and explain the risk Place your answer in column (2) of the table below (1) (2) Misclassification Assertion at risk If capital items are misclassified as expenses If expenses are misclassified as capital items Place the word Yes in ONLY ONE of the columns in the table below Procedure 1 has been completed as guidance to you Audit procedure Substantive Testing Control Testing Transactions Balances Analytical Preventative Detective Corrective procedures Yes 1. Auditor checks the signature of the manager on sales invoices 2. Auditor traces sales invoices to the sales journals 3. Auditors checks the client computer for processing amounts over credit limit 4. Auditor confirms with a customer the balance owed 5. Auditor compares sales with cost of goods sold 6. Auditor checks if balance of Accounts Payable is supported by appropriate documents Paul is the partner in charge of the audit for a new client, Umbrella Holdings (UH). The client engaged Paul's audit firm in November 2019, in preparation for the 2020 audit. From 30 January 2020 onwards, UH has consistently paid suppliers late, well in excess of the suppliers' agreed credit terms. This has resulted in some suppliers demanding cash on delivery from UH. Paul is also aware from his review of correspondence between UH and its bank that the company has been experiencing cash flow problems since 2018. Required 1. Identify 4 conditions that would be of concern to Paul (8 marks) 2. Out of the 4 conditions you identified, What is the risk involved in this scenario (2 marks) Place your answer in columns (1) and (2) of the table below (1) (2) Factor Risk Below is four subsequent events discovered by Sundara, the senior auditor while auditing the financial report of her client, Jamila Ltd for the year ending 30 June 2021. Sundara completed the audit report on 31 August 2021 and Jamila Ltd published the audited financial report on 30 September 2021. Required State the type of subsequent event and the appropriate treatment for each of the four subsequent events in the table below Place your answer in columns (2) and (3) of the table provided here below (1) (2) (3) Subsequent event Type of subsequent event Treatment 1. On 5 July 2021 customer returned products sold for $12,000 on 20 June 2021. This transaction was not recorded in the accounting books of Jamila Ltd. Sundara understands that the unrecorded sales return amount is a material error 2. Sundara spoke with Jamila solicitor and found that there is a pending case in the court which might lead to Jamila Ltd paying large compensation to its customer 3. While Sundara was reading the Sydney Morning Herald newspaper she realised that on 1 October 2021 Jamila Ltd had a fire that destroyed 80% of the warehouse. 4. Sundara found that depreciation for Machinery recorded for the financial year ended 30 June 2021 is understated by $10,000. Sundara investigation revealed that this is both unintentional and immaterial error. Below is a situation where the accountant of the client has misclassified repairs and maintenance Required For each misclassification state the assertions at risk and explain the risk Place your answer in column (2) of the table below (1) (2) Misclassification Assertion at risk If capital items are misclassified as expenses If expenses are misclassified as capital items Place the word Yes in ONLY ONE of the columns in the table below Procedure 1 has been completed as guidance to you Audit procedure Substantive Testing Control Testing Transactions Balances Analytical Preventative Detective Corrective procedures Yes 1. Auditor checks the signature of the manager on sales invoices 2. Auditor traces sales invoices to the sales journals 3. Auditors checks the client computer for processing amounts over credit limit 4. Auditor confirms with a customer the balance owed 5. Auditor compares sales with cost of goods sold 6. Auditor checks if balance of Accounts Payable is supported by appropriate documents Paul is the partner in charge of the audit for a new client, Umbrella Holdings (UH). The client engaged Paul's audit firm in November 2019, in preparation for the 2020 audit. From 30 January 2020 onwards, UH has consistently paid suppliers late, well in excess of the suppliers' agreed credit terms. This has resulted in some suppliers demanding cash on delivery from UH. Paul is also aware from his review of correspondence between UH and its bank that the company has been experiencing cash flow problems since 2018. Required 1. Identify 4 conditions that would be of concern to Paul (8 marks) 2. Out of the 4 conditions you identified, What is the risk involved in this scenario (2 marks) Place your answer in columns (1) and (2) of the table below (1) (2) Factor Risk Below is four subsequent events discovered by Sundara, the senior auditor while auditing the financial report of her client, Jamila Ltd for the year ending 30 June 2021. Sundara completed the audit report on 31 August 2021 and Jamila Ltd published the audited financial report on 30 September 2021. Required State the type of subsequent event and the appropriate treatment for each of the four subsequent events in the table below Place your answer in columns (2) and (3) of the table provided here below (1) (2) (3) Subsequent event Type of subsequent event Treatment 1. On 5 July 2021 customer returned products sold for $12,000 on 20 June 2021. This transaction was not recorded in the accounting books of Jamila Ltd. Sundara understands that the unrecorded sales return amount is a material error 2. Sundara spoke with Jamila solicitor and found that there is a pending case in the court which might lead to Jamila Ltd paying large compensation to its customer 3. While Sundara was reading the Sydney Morning Herald newspaper she realised that on 1 October 2021 Jamila Ltd had a fire that destroyed 80% of the warehouse. 4. Sundara found that depreciation for Machinery recorded for the financial year ended 30 June 2021 is understated by $10,000. Sundara investigation revealed that this is both unintentional and immaterial error.
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according to the data Ans Q1 1 When capital goods are classified as cost Dangers of danger As a rule ... View the full answer
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