Manuel has a year-end of 31 March 2021. Manuel's computerised wages program is backed up daily,...

 

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Manuel has a year-end of 31 March 2021. Manuel's computerised wages program is backed up daily, however for a period of two months the wages records and the back-ups have been corrupted, and therefore cannot be accessed. Wages and salaries for these two months are £2.2 million and profit before tax is £20 million. Polly Ltd Polly Ltd manufactures children's clothing and has a year end of 30 April 2021. The year-end audit is in progress. The draft financial statements recognise profit before tax of £5.2 million and total assets of £36 million. At the planning meeting, the finance director of Polly Ltd informed the audit you that the company was closing one of its smaller production sites and as a result, a number of employees would be made redundant. A redundancy provision of £220,000 is included in the draft financial statements. The audit team are carrying out audit procedures on provisions and have calculated that the necessary provision for the redundancies should be £610,000. The finance director is not willing to adjust the draft financial statements. b) For each of the above clients, identify the issue, assess whether it is material and outline the impact on the audit report if the issue remains unresolved. Manuel has a year-end of 31 March 2021. Manuel's computerised wages program is backed up daily, however for a period of two months the wages records and the back-ups have been corrupted, and therefore cannot be accessed. Wages and salaries for these two months are £2.2 million and profit before tax is £20 million. Polly Ltd Polly Ltd manufactures children's clothing and has a year end of 30 April 2021. The year-end audit is in progress. The draft financial statements recognise profit before tax of £5.2 million and total assets of £36 million. At the planning meeting, the finance director of Polly Ltd informed the audit you that the company was closing one of its smaller production sites and as a result, a number of employees would be made redundant. A redundancy provision of £220,000 is included in the draft financial statements. The audit team are carrying out audit procedures on provisions and have calculated that the necessary provision for the redundancies should be £610,000. The finance director is not willing to adjust the draft financial statements. b) For each of the above clients, identify the issue, assess whether it is material and outline the impact on the audit report if the issue remains unresolved.

Answer rating: 100% (QA)

Answer a When the accounting software goes down it will create a great impact on the accoun... View the full answer