Your firm is the auditor of Trojan Trading Ltd. The audited financial statements for the year ended
Question:
Your firm is the auditor of Trojan Trading Ltd. The audited financial statements for the year ended December 31, 2020, show the company’s revenue was $5 million and the profit before tax was $320,000. The part of the working papers that records audit work on the bank reconciliation at December 31, 2020, noted cash receipts of $14,000 recorded in the cash book before the year end that were not credited to the bank statement until a week after year end. No further work was carried out because the amount was not considered material, and that conclusion was noted in the audit working papers. In February 2021, the company investigated delays in depositing cash receipts and discovered a fraud of $36,000. The fraud was carried out by the cashier who was responsible for depositing all receipts and preparing the bank reconciliation.
Required
a. What further work should the auditor have done in this situation (if any)?
b. Should this have been reported? If so, to whom?
Financial StatementsFinancial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Auditing A Practical Approach
ISBN: 978-1119566007
3rd Canadian edition
Authors: Robyn Moroney, Fiona Campbell, Jane Hamilton, Valerie Warren