You are the Audit Trainee at KIC Chartered Accountants and Auditors. You are part of the engagement
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Question:
You are the Audit Trainee at KIC Chartered Accountants and Auditors. You are part of the engagement team currently auditing Ezulwini Plumbing Manufacturers Ltd. This assignment is nearing the end. Your team would be meeting the Audit Partner to discuss the findings of this audit assignment. Your Audit Manager has advice you that the audit Partner Mr Daniel Mlangeni (FCCA, CA(SD)) would also like to see a draft audit report for Ezulwini Plumbing Forest.
The audit manager, Ms Dolly S. Dlamini (CA, SD) has asked you to draft the audit report.
She asked you to take into account the following unresolved issues or disagreements with the client:
Fire damages At year-end, fire broke within the firm and burnt three offices before it was successfully put off by the Fire and Emergency Department before it spread to the whole factory. Part of the Finance department offices were extensively damage resulting to loss of files and records. The company has reconstructed some of the files including the accounts payables and accounts receivables. The company requested all accounts receivables owing the company to supply Ezulwini Plumbing with all the information about their debt to the company and in return, they were promised a discount of 10% if they respond within 3 weeks. You are not sure about the completeness of these records and you consider these figures as very material on the financial statements. Year-end receivables figure was E2.5 million and the total sales of the company was EE30 million. The accounts payables is unknown at year-end, and the company believes that this figure will be correctly estimated in three monts time as all accounts payables would have submitted their statements to Ezulwini Plumbing.
Accrued Wages
Ezulwini Plumbing Forest has not included accrued wages of E50 000 for unpaid salaries at year end in both the Income statement and Statement of Financial Position. You have asked them twice to make the adjustment but they have not yet done so.
Other information:
Total assets: E20 million Profit before tax: E5 million
(b) Prepare a draft Audit Report to be submitted to the Audit Manager taking into account the implications to the audit report of the above two issues.
Related Book For
Auditing The Art and Science of Assurance Engagements
ISBN: 978-0133405507
13th Canadian edition
Authors: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Joanne C. Jones
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