You are undertaking the audit for the year ended 30 June 2020 of Berkely Beats Ltd,...

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You are undertaking the audit for the year ended 30 June 2020 of Berkely Beats Ltd, a manufacturer and retailer of steel drums. As in previous years, Berkely Beats has accounted for inventory on a last in, first out (LIFO) basis. Berkely Beats also uses a 'just-in-time' inventory management system and therefore the effect of this departure from Australian accounting standards was previously not material. In the current year, however, the company has a large stockpile of inventory at year end, due to an unexpected cancellation of a major order en route (on the way to) to its destination. In order to cut freight costs, Berkely Beats stored the goods temporarily in Thailand, hoping for an order from another South-east Asian customer. Unfortunately, you were not told of this problem until after balance date and did not conduct a stocktake of the inventory. You have also been told that some of the inventory has since been shipped to a number of different customers to fill outstanding orders. The available audit procedures have been unable to validate the existence of this inventory at balance date. The relevant inventory is currently recorded at $2 500 000. Audit procedures have indicated that, had inventory been accounted for on a first in, first out (FIFO) basis, it would have been recorded at $3 500 000. Materiality for the audit has been set at $1 000 000. Required What is the most appropriate auditor's opinion for Berkely Beats for the year ended 30 June 2020? Explain your answer (10 marks) 4B) You have completed the audit of the financial report of Doors & Windows Ltd (Doors & Windows), and the client is in the process of preparing its annual report. Doors & Windows has provided you with a first draft of the annual report for review and, having reviewed the financial report contained within the annual report, you are satisfied that it is consistent with the audited information. You are now reviewing the preliminary information contained within the annual report. Within the chairperson's review of operations, you note the following statement: "The directors are of the opinion that the economic conditions currently facing Doors & Windows Ltd will soon abate, and closure of additional manufacturing facilities will be unnecessary". You are quite surprised, as your discussions with management have indicated that closure of two further factories is imminent. In addition, the financial report includes a large provision for redundancies, together with disclosure of the nature of the item. You approach the CEO with your concerns, and he replies: 'Don't worry-it's only a first draft, and anyway the auditors don't report on that. Required (a) Outline the auditor's responsibilities with respect to information accompanying a financial report. (5 marks) (b) Indicate the most appropriate course of action for you as the auditor if the chairperson's review of operations is not amended. (10 marks) You are undertaking the audit for the year ended 30 June 2020 of Berkely Beats Ltd, a manufacturer and retailer of steel drums. As in previous years, Berkely Beats has accounted for inventory on a last in, first out (LIFO) basis. Berkely Beats also uses a 'just-in-time' inventory management system and therefore the effect of this departure from Australian accounting standards was previously not material. In the current year, however, the company has a large stockpile of inventory at year end, due to an unexpected cancellation of a major order en route (on the way to) to its destination. In order to cut freight costs, Berkely Beats stored the goods temporarily in Thailand, hoping for an order from another South-east Asian customer. Unfortunately, you were not told of this problem until after balance date and did not conduct a stocktake of the inventory. You have also been told that some of the inventory has since been shipped to a number of different customers to fill outstanding orders. The available audit procedures have been unable to validate the existence of this inventory at balance date. The relevant inventory is currently recorded at $2 500 000. Audit procedures have indicated that, had inventory been accounted for on a first in, first out (FIFO) basis, it would have been recorded at $3 500 000. Materiality for the audit has been set at $1 000 000. Required What is the most appropriate auditor's opinion for Berkely Beats for the year ended 30 June 2020? Explain your answer (10 marks) 4B) You have completed the audit of the financial report of Doors & Windows Ltd (Doors & Windows), and the client is in the process of preparing its annual report. Doors & Windows has provided you with a first draft of the annual report for review and, having reviewed the financial report contained within the annual report, you are satisfied that it is consistent with the audited information. You are now reviewing the preliminary information contained within the annual report. Within the chairperson's review of operations, you note the following statement: "The directors are of the opinion that the economic conditions currently facing Doors & Windows Ltd will soon abate, and closure of additional manufacturing facilities will be unnecessary". You are quite surprised, as your discussions with management have indicated that closure of two further factories is imminent. In addition, the financial report includes a large provision for redundancies, together with disclosure of the nature of the item. You approach the CEO with your concerns, and he replies: 'Don't worry-it's only a first draft, and anyway the auditors don't report on that. Required (a) Outline the auditor's responsibilities with respect to information accompanying a financial report. (5 marks) (b) Indicate the most appropriate course of action for you as the auditor if the chairperson's review of operations is not amended. (10 marks)