Case Study 2 You are recently appointed to an Audit Manager position in Bowman & Bowman....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Case Study 2 You are recently appointed to an Audit Manager position in Bowman & Bowman. This morning, you have received an email from one of the audit partners, Sean Gupta providing you with a number of exhibits concerning Seri Rimba, which he requested you should use in drafting its audit plan for the year-ended 2019. Exhibit 1 - Company Background Seri Rimba was established 20 years ago and specialises in the custom design and manufacture of wooden furniture. Seri Rimba has become known as a leading supplier of wood-based furniture especially, teak-made to customers. Its customer base is located mainly in its country of incorporation, Malaysia and occasionally, received big orders from oversea customers. Most of the components used in Seri Rimba manufacturing process are imported from foreign suppliers, largely from Indonesia. The furniture made by Seri Rimba are mostly made to order in the company's three manufacturing sites. Customer approach Seri Rimba front office to design and develop a furniture or piece of furniture specific to their needs. Where management considers that the design work will be significant, the customer is required to pay 30% payment in advance, which is used to fund the design work. The remaining 70% is paid on delivery of the furniture to the customer. Typically, a set of furniture takes three months to build, and a smaller, separate piece of furniture takes on average six weeks. The design and manufacture of bespoke furniture involving payments in advance has increased during the year. Seri Rimba also manufactures a range of generic products, displayed in its gallery which are offered for sale to all customers. The projected financial statements for the 2019 year-end recognise revenue of RM93 million (2018-RM90 million), profit after tax of RM10.8 (2018-RM10.2) and total assets of RM61 million (2018- RM56 million). Seri Rimba became a public listed firm in its place of incorporation in 2018, and looking to achieve a listing in foreign stock exchange in June 2020. Exhibit 2- Notes from Meeting with Finance Director This year has been successful from a strategic point of view in that Seri Rimba achieved its stock exchange in March 2018, and in doing so raised a significant amount from the external equity financing. All of the company's manufacturing sites will be closed at the year-end to allow for the inventory counts to take place. According to the most recent management accounts, which are available, at 30 November 2019 work in progress is valued at RM8 million (2018- RM5.5 million) and the majority of these orders will not be complete until after the year-end. In recent weeks several customers have returned furniture due to faults, and Seri Rimba offers a warranty to guarantee that defective items will be replaced free of charge. Exhibit 3 - Preliminary analytical review and other financial information Based on Forecasted Data of 31 December 2019 15% Operating margin Inventory holding period Receivable collection period Trade payables payment period Earnings per share Share price b) Provision in returned goods 175 days 90 days Required: Use the information provided in exhibits to prepare briefing notes for a discussion with Sean Gupta prior to audit of Seri Rimba. Your notes should detail, in which you: d) Working capital 60 days 80 cents per share RM3.15 Evaluate the audit risks to be considered in planning the audit of Seri Rimba in matters concerning of: a) Inventory valuation c) Payment in advance and revenue recognition e) Disclosure for listed firms f) Stock listing in foreign market Based on Audited Data Of 31 December 2018 13% 150 days 70 days 55 days [20 marks] [10 marks] [25 marks] [15 marks] [15 marks] [15 marks] Case Study 2 You are recently appointed to an Audit Manager position in Bowman & Bowman. This morning, you have received an email from one of the audit partners, Sean Gupta providing you with a number of exhibits concerning Seri Rimba, which he requested you should use in drafting its audit plan for the year-ended 2019. Exhibit 1 - Company Background Seri Rimba was established 20 years ago and specialises in the custom design and manufacture of wooden furniture. Seri Rimba has become known as a leading supplier of wood-based furniture especially, teak-made to customers. Its customer base is located mainly in its country of incorporation, Malaysia and occasionally, received big orders from oversea customers. Most of the components used in Seri Rimba manufacturing process are imported from foreign suppliers, largely from Indonesia. The furniture made by Seri Rimba are mostly made to order in the company's three manufacturing sites. Customer approach Seri Rimba front office to design and develop a furniture or piece of furniture specific to their needs. Where management considers that the design work will be significant, the customer is required to pay 30% payment in advance, which is used to fund the design work. The remaining 70% is paid on delivery of the furniture to the customer. Typically, a set of furniture takes three months to build, and a smaller, separate piece of furniture takes on average six weeks. The design and manufacture of bespoke furniture involving payments in advance has increased during the year. Seri Rimba also manufactures a range of generic products, displayed in its gallery which are offered for sale to all customers. The projected financial statements for the 2019 year-end recognise revenue of RM93 million (2018-RM90 million), profit after tax of RM10.8 (2018-RM10.2) and total assets of RM61 million (2018- RM56 million). Seri Rimba became a public listed firm in its place of incorporation in 2018, and looking to achieve a listing in foreign stock exchange in June 2020. Exhibit 2- Notes from Meeting with Finance Director This year has been successful from a strategic point of view in that Seri Rimba achieved its stock exchange in March 2018, and in doing so raised a significant amount from the external equity financing. All of the company's manufacturing sites will be closed at the year-end to allow for the inventory counts to take place. According to the most recent management accounts, which are available, at 30 November 2019 work in progress is valued at RM8 million (2018- RM5.5 million) and the majority of these orders will not be complete until after the year-end. In recent weeks several customers have returned furniture due to faults, and Seri Rimba offers a warranty to guarantee that defective items will be replaced free of charge. Exhibit 3 - Preliminary analytical review and other financial information Based on Forecasted Data of 31 December 2019 15% Operating margin Inventory holding period Receivable collection period Trade payables payment period Earnings per share Share price b) Provision in returned goods 175 days 90 days Required: Use the information provided in exhibits to prepare briefing notes for a discussion with Sean Gupta prior to audit of Seri Rimba. Your notes should detail, in which you: d) Working capital 60 days 80 cents per share RM3.15 Evaluate the audit risks to be considered in planning the audit of Seri Rimba in matters concerning of: a) Inventory valuation c) Payment in advance and revenue recognition e) Disclosure for listed firms f) Stock listing in foreign market Based on Audited Data Of 31 December 2018 13% 150 days 70 days 55 days [20 marks] [10 marks] [25 marks] [15 marks] [15 marks] [15 marks]
Expert Answer:
Answer rating: 100% (QA)
E val uate the audit risks to be considered in planning the audit of Ser i Rim ba in matters concerning of a Inventory valuation 20 marks ANS WER Based on the information provided there are several au... View the full answer
Related Book For
Microeconomics Theory and Applications with Calculus
ISBN: 978-0133019933
3rd edition
Authors: Jeffrey M. Perloff
Posted Date:
Students also viewed these accounting questions
-
A flyer from one of the world's largest brokers says, "Most personal investment managers base their fees on a percentage of assets managed. We believe this is in your best interest because your...
-
In teams, select a company from one of the following industries: banking, food service, manufacturing, or retail. For this company: A. Identify the primary activities that the company must perform to...
-
You have received an email from a graduating student, the son or daughter of an acquaintance. This young person wants advice: How does he or she get a job like yours? The student asks, "What do I...
-
In Exercises 8594, find all values of x satisfying the given conditions. y = 2x + x 8x + 2 and y = 6.
-
Show that the matrix given by the cubic spline basis functions is positive definite.
-
Replace the force and couple moment system acting on the rectangular block by a wrench. Specify the magnitude of the force and couple moment of the wrench and where its line of action intersects the...
-
Prove that $R^{2}$ is the square of the correlation between $\mathbf{y}$ and $\hat{\mathbf{y}}$.
-
On June 30, Danver Limited issues 5%, 20-year bonds payable with a face value of $120,000. The bonds are issued at 94 and pay interest on June 30 and December 31. Requirements 1. Journalize the...
-
Chong, Inc. provides advice to art enthusiast interested in purchasing art at Sotheby's annual art auctions. On December 31, 2012, Chong's account balances are shown below in the Adjusted Trial...
-
On 1st January 2019 the account receivable balance brought forward from the previous year totaled 140,900. During the year ended 31 December 2019, total sales amounted to 322,520 of which 85%...
-
Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria's owner has determined that the shop...
-
The method below takes a String parameter called str. Complete the method so that it returns a new string where each each character in the original string has been repeated 3 times. For example if...
-
Within the context of rapidly evolving technological landscapes and dynamic market conditions, how do leading organizations formulate and execute adaptive strategies to maintain competitive advantage...
-
Considering the evolving nature of workforce dynamics and the imperative to attract, retain, and develop top talent in competitive labor markets, how do organizations craft holistic talent management...
-
Considering the multifaceted interplay of regulatory complexities and evolving compliance standards across international jurisdictions, how do organizations navigate regulatory landscapes...
-
In order to determine if an increase in GDP is caused by an increase in quantities produced or by an increase in price (inflation), what aspect the economists could use ?
-
In order to tighten up workpapers, the author recommends that an auditor do which one of the following: a. include all "to do" lists, whether or not completed b. complete the audit program c. reduce...
-
In what ways does a well-designed enterprise search software vary from popular search engines (e.g., Bing, DuckDuckGo, and Google)?
-
How do parents who do not receive subsidies feel about the two child-care programs analyzed in the Challenge Solution figure?
-
Suppose that most people will not speed if the expected fine is at least $500. The actual fine for speeding is $800. How high must the probability of being caught and convicted be to discourage...
-
If the inverse demand function for radios is p = a - bq, what is the consumer surplus if the price is a/2?
-
Explain the difference between isotropic total cross-section and the transport crosssection as in Eq. (5.49). Why transport cross-section is not used in the transport theory? Data From Equation...
-
Following up on question number 3, assume the school conducts a manifestation determination meeting. Tim attends the meeting with his parents. At the meeting, Tim tells the team that smoking helps...
-
Which is an advantage to an employee who participates in a profit-sharing plan? A. Employee does not have to make investment decisions. B. Graded vesting schedule. C. Older employees receive the...
Study smarter with the SolutionInn App