You are an auditor on the Canoh Construction Limited (Canoh) engagement for the financial year ending...

  

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You are an auditor on the Canoh Construction Limited (Canoh) engagement for the financial year ending 30 June 2019. Canoh is a large Australian construction company listed on the ASX that specialises in the construction of large projects including residential and commercial developments and public infrastructure such as roads. You are currently planning the Canoh audit and have noted the following information: Canoh recognises its construction revenue over time as it satisfies performance obligations relating to specific milestones built into each contract. The company has been working on a number of large residential developments in Victoria over the last year. It has recently been discovered during a progress inspection that a subcontractor had used a banned cladding material for some of the houses being built to cut costs. Building on these projects has subsequently been delayed as the cladding installed will need to be removed and replaced. • In July 2018, Canoh successfully won the tender to build a large commercial complex in Malaysia. Building on the project has commenced and Canoh has made good progress during the year and is on track for completion in June 2020. Payments on this building contract are made in Malaysian Ringgit rather than in Australian dollars. Canoh owns several plots of land that it anticipates building either residential or commercial developments on in future. Canoh recently received communications from the Environmental Protection Agency notifying the company that hazardous ground gases have been detected in below-ground monitoring wells in several locations close to the perimeter of one of Canoh's largest plot of land on the fringe of the city in Sydney. Canoh has engaged environmental specialists to undertake testing of this plot of land to determine whether hazardous gases are present and potential courses of remedial actions. REQUIRED: Based on the information above, describe three (3) significant audit risks which might result in material misstatements in Canoh's financial report for the period ending 30 June 2019. For each risk, indicate the key account and primary assertion at risk, and provide a specific and practical substantive test of detail to gather audit evidence in respect of the identified risk. Page 2 of 17 Note that in providing your responses, you are to rely on the facts provided above in relation to Canoh only i.e. do not assume additional facts that are not included in the scenario presented. [12 marks] For each of the three (3) risks, marks will be allocated as follows: (i) Explanation of audit risk (1.5 marks each), (ii) Key account affected (0.5 mark each), (iii) Primary assertion at risk (1 mark each), (iv) Substantive test of detail (1 mark each). You are an auditor on the Canoh Construction Limited (Canoh) engagement for the financial year ending 30 June 2019. Canoh is a large Australian construction company listed on the ASX that specialises in the construction of large projects including residential and commercial developments and public infrastructure such as roads. You are currently planning the Canoh audit and have noted the following information: Canoh recognises its construction revenue over time as it satisfies performance obligations relating to specific milestones built into each contract. The company has been working on a number of large residential developments in Victoria over the last year. It has recently been discovered during a progress inspection that a subcontractor had used a banned cladding material for some of the houses being built to cut costs. Building on these projects has subsequently been delayed as the cladding installed will need to be removed and replaced. • In July 2018, Canoh successfully won the tender to build a large commercial complex in Malaysia. Building on the project has commenced and Canoh has made good progress during the year and is on track for completion in June 2020. Payments on this building contract are made in Malaysian Ringgit rather than in Australian dollars. Canoh owns several plots of land that it anticipates building either residential or commercial developments on in future. Canoh recently received communications from the Environmental Protection Agency notifying the company that hazardous ground gases have been detected in below-ground monitoring wells in several locations close to the perimeter of one of Canoh's largest plot of land on the fringe of the city in Sydney. Canoh has engaged environmental specialists to undertake testing of this plot of land to determine whether hazardous gases are present and potential courses of remedial actions. REQUIRED: Based on the information above, describe three (3) significant audit risks which might result in material misstatements in Canoh's financial report for the period ending 30 June 2019. For each risk, indicate the key account and primary assertion at risk, and provide a specific and practical substantive test of detail to gather audit evidence in respect of the identified risk. Page 2 of 17 Note that in providing your responses, you are to rely on the facts provided above in relation to Canoh only i.e. do not assume additional facts that are not included in the scenario presented. [12 marks] For each of the three (3) risks, marks will be allocated as follows: (i) Explanation of audit risk (1.5 marks each), (ii) Key account affected (0.5 mark each), (iii) Primary assertion at risk (1 mark each), (iv) Substantive test of detail (1 mark each).

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1 Can oh recognizes its construction revenue over time as it satisfies performance obligations relating to specific milestones built into each contract The company has been working on a number of larg... View the full answer