Consider the following independent situations: 1. Hero Ltd develops cloud based accounting software for Australian and...

 

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Consider the following independent situations: 1. Hero Ltd develops cloud based accounting software for Australian and New Zealand accounting practices and commercial businesses. Louise, a systems analyst for Hero Ltd, has just identified a problem in one of the program algorithms used to calculate and record GST on purchases. The result of this problem is that the current version of the software has undervalued Hero's clients' GST payable. Required: Identify the internal controls which would have prevented the faulty version of this program being used live on client data. (5 marks) 2. Kumbayah Ltd is an Australian mining company operating in Western Australia that is seeking to improve the quality of its greenhouse gas emissions disclosures. Required: As auditor of Kumbayah Ltd, outline the steps that you need to take collect sufficient and appropriate audit evidence relating to GHG emissions. What specialist assistance might be required of the audit team to undertake these procedures? (5 marks) 3. You are the senior involved in planning the audit of Acuity Ltd, a subsidiary of a UK bulky goods retailer that entered the Australian market in September 2018. Acuity has built several mega stores in Victoria and South Australia and sources much of its stock from Chinese suppliers. The store development has been financed by a long term loan from the parent company and short term loans from Hardly Permanent Bank Ltd. As part of the planning process you have noticed: • Acuity Ltd has not yet made a profit. • COVID, and Australia's ongoing trade disputes with China, continues to impact supplies and is significantly increasing the cost of inventory purchases. • Hardly Permanent Bank Ltd has requested cash flow forecasts for the coming year to support the financing arrangements that are currently in place. Required: Identify the business risks that exist in this situation. Describe any further evidence that you will need to assess the appropriateness of the going concern assumption. (5 marks) Consider the following independent situations: 1. Hero Ltd develops cloud based accounting software for Australian and New Zealand accounting practices and commercial businesses. Louise, a systems analyst for Hero Ltd, has just identified a problem in one of the program algorithms used to calculate and record GST on purchases. The result of this problem is that the current version of the software has undervalued Hero's clients' GST payable. Required: Identify the internal controls which would have prevented the faulty version of this program being used live on client data. (5 marks) 2. Kumbayah Ltd is an Australian mining company operating in Western Australia that is seeking to improve the quality of its greenhouse gas emissions disclosures. Required: As auditor of Kumbayah Ltd, outline the steps that you need to take collect sufficient and appropriate audit evidence relating to GHG emissions. What specialist assistance might be required of the audit team to undertake these procedures? (5 marks) 3. You are the senior involved in planning the audit of Acuity Ltd, a subsidiary of a UK bulky goods retailer that entered the Australian market in September 2018. Acuity has built several mega stores in Victoria and South Australia and sources much of its stock from Chinese suppliers. The store development has been financed by a long term loan from the parent company and short term loans from Hardly Permanent Bank Ltd. As part of the planning process you have noticed: • Acuity Ltd has not yet made a profit. • COVID, and Australia's ongoing trade disputes with China, continues to impact supplies and is significantly increasing the cost of inventory purchases. • Hardly Permanent Bank Ltd has requested cash flow forecasts for the coming year to support the financing arrangements that are currently in place. Required: Identify the business risks that exist in this situation. Describe any further evidence that you will need to assess the appropriateness of the going concern assumption. (5 marks)

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