Hong Kong Electronics Company Limited (HKE) is a company engaging in trading various electronic components. You...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Hong Kong Electronics Company Limited ("HKE") is a company engaging in trading various electronic components. You are the audit manager of the audit of HKE's financial statements for the year ended 31 December 2020. At the beginning of the audit, it is determined that the materiality for the financial statements as a whole should be HK$400,000 and the threshold for clearly trivial misstatements should be HK$10,000. Inventory stocktake was carried out on 31 December 2020. The following audit findings were identified during the inventory stocktake: 1. There was a typo in the accounting record of item A. The quantity of item A in the accounting record is 960 units while the quantity counted during the stocktake was 690 units. 2. 20 units of item B had been misclassified as item C previously. The quantity of item B in the accounting record is 280 units while the quantity counted during the stocktake was 300 units. Meanwhile, the quantity of item C in the accounting record is 360 units while the quantity counted during the stocktake was 340 units. 3. 50 units of item C were found to be worn out and no longer with a sellable condition. 4. Inbound of inventory was not updated on a timely basis. 35 units of item D were already received by the warehouse but they had not been reflected in the accounting record. The quantity of item D in the accounting record is 500 units while the quantity counted during the stocktake was 535 units. The following table is the accounting record of the inventory. HKE adopts weighted average costing as inventory costing method. Quantity (unit) Weighted average cost/unit HK$1,500 HK$2,000 HK$1,600 HKS1,750 Item 960 B 280 360 D 500 Required: (a) Assume the audit findings presented above are all misstatements identified in the audit relevant to the inventory balance. Evaluate whether these misstatements, individually and aggregately, are material misstatements. (b) What is the implication of each of the audit findings on the risk assessment of the inventory balance? Hong Kong Electronics Company Limited ("HKE") is a company engaging in trading various electronic components. You are the audit manager of the audit of HKE's financial statements for the year ended 31 December 2020. At the beginning of the audit, it is determined that the materiality for the financial statements as a whole should be HK$400,000 and the threshold for clearly trivial misstatements should be HK$10,000. Inventory stocktake was carried out on 31 December 2020. The following audit findings were identified during the inventory stocktake: 1. There was a typo in the accounting record of item A. The quantity of item A in the accounting record is 960 units while the quantity counted during the stocktake was 690 units. 2. 20 units of item B had been misclassified as item C previously. The quantity of item B in the accounting record is 280 units while the quantity counted during the stocktake was 300 units. Meanwhile, the quantity of item C in the accounting record is 360 units while the quantity counted during the stocktake was 340 units. 3. 50 units of item C were found to be worn out and no longer with a sellable condition. 4. Inbound of inventory was not updated on a timely basis. 35 units of item D were already received by the warehouse but they had not been reflected in the accounting record. The quantity of item D in the accounting record is 500 units while the quantity counted during the stocktake was 535 units. The following table is the accounting record of the inventory. HKE adopts weighted average costing as inventory costing method. Quantity (unit) Weighted average cost/unit HK$1,500 HK$2,000 HK$1,600 HKS1,750 Item 960 B 280 360 D 500 Required: (a) Assume the audit findings presented above are all misstatements identified in the audit relevant to the inventory balance. Evaluate whether these misstatements, individually and aggregately, are material misstatements. (b) What is the implication of each of the audit findings on the risk assessment of the inventory balance?
Expert Answer:
Answer rating: 100% (QA)
The completion stage of the audit is when the auditor reviews the work performed and considers the implications for the auditors report A crucial part of this review is the evaluation of misstatements ... View the full answer
Related Book For
Auditing and Assurance Services A Systematic Approach
ISBN: 978-0077732509
10th edition
Authors: William Messier Jr, Steven Glover, Douglas Prawitt
Posted Date:
Students also viewed these accounting questions
-
You are the audit manager of Overseas Explorer Ltd (OEL), which acquired the small proprietary company Local Pty Ltd (Local) on 30 June 2018. The price of the acquisition was agreed at $5 million, on...
-
The summarized statements for the year ended 31 December 2007 for Mat, Rug and P entities are as follows: Statements of comprehensive income for the year ended 31 December 2007 The following...
-
You are the audit manager of Michael & Gabriel CPA Limited and are currently carrying out the audit of Eason Limited (Eason) for the year ended 30 September 2020. Eason is a company incorporated...
-
How can adults continue to function relatively normally after surgery to remove the thymus, tonsils, spleen, or lymph nodes?
-
Describe the financial planning process. How does asset intensity affect a financial plan?
-
A coil having inductance 0.14 H and resistance of 12 is connected across a 110-V, 25-Hz line. Compute (a) The current in the coil, (b) The phase angle between the current and the supply voltage, (c)...
-
A statistics teacher claims that, on the average, 20% of her students get a grade of A, 35% get a B, 25% get a C, 10% get a D, and 10% get an F. The grades of a random sample of 100 students were...
-
Bradley's Miniature Golf and Driving Range Inc. was opened on March 1 by Bob Dean. These selected events and transactions occurred during March. May 1 Stockholders invested $50,000 cash in the...
-
Which function of money enhances the ability of households to accumulate wealth?
-
write two pages review for the article The 4 dimensions of digital trust, charted across 42 countries by Bhaskar Chakravorti, Ajay Bhalla, and Ravi Shankar Chaturvedi to give a personal opinion about...
-
less than 10% of your total Calories per day should come fromadded sugar. To calculate number of calories from added sugars,take the grams of added sugars you consumed per day (not over 2days) and...
-
When is sequential sampling appropriate?
-
Fill in the Blank. Each step of Jacobi's method reduces a pair of off-diagonal elements to ___________ .
-
Fill in the Blank. The ___________ theorem permits the representation of any vector as a linear combination of the eigenvectors of the system.
-
Under what conditions may discovery sampling be appropriate?
-
Fill in the Blank. Holzer's method is basically a(n) ___________ method.
-
From Microsoft Sentinel, what type of data can you generate from a Schedule Query rule? Select only one answer. Bookmarks and entities Bookmarks and incidents Comments and incidents Incidents and...
-
Whats the difference between an ordinary annuity and an annuity due? What type of annuity is shown below? How would you change the time line to show the other type of annuity?
-
Distinguish among the three categories of expenses. Provide an example of each type of expense.
-
Cole & Cole, CPAs, are auditing the financial statements of Consolidated Industries Company for the year ended December 31, 2015. On April 2, 2016, an inquiry letter to J. J. Young, Consolidated's...
-
What risk factors associated with human resource management could pose significant inherent risks?
-
Discuss the approach you would take to building a system for playing Scrabble or another word game of the sort. What limitations does your system have? How likely do you think it is that your system...
-
Discuss the current state of the art of game-playing computer systems in relation to the following games: chess, checkers, Go, bridge, Othello, tic-tac-toe. What advances are likely in the near...
-
Show the steps that would be taken in running the Minimax algorithm on the game tree in Figure 6.7. Now run through the same tree using alpha-beta pruning. How do the two compare? data from figure...
Study smarter with the SolutionInn App