You have been selected as a member of the team to audit Appleton Electronics and have...

 

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You have been selected as a member of the team to audit Appleton Electronics and have been assigned to audit the accounts payable account for Appleton Electronics, a wholesaler of hardware equipment. You are the continuing auditor and you assume that the company has good internal controls and is not designated as a high risk-audit client. During the current audit, adjustments were made regarding accounts payable, but one of them was considered material. This adjustment related to the capitalisation of expenditure not yet paid. You decided that the amount will have a significant impact on the financial results and therefore booked an adjustment to be made. However the CEO and CFO of Appleton insisted that capitalizing the amount was the correct treatment and that in this particular case, departing from the standard was warranted in order to present a true and fair view of that transaction. You explained to both of them that departing from the applicable accounting standard was not warranted in this case. REQUIRED: a. Identify two financial statement assertions that relate to accounts payable. For each assertion identified, list two types of audit evidence that would address the assertion and two procedures used to gather the audit evidence. Organise your answer as follows: Financial Statement- Audit Evidence Procedure Assertion (10 marks) b. Discuss the likely impacts of not making the material adjustment, on the financial results for the year under audit and on the future of Appleton Electronics. (5 marks) C. Discuss in detail the type of opinion you are likely to issue in the above situation, giving the reasons for issuing such an opinion. (5 marks) You have been selected as a member of the team to audit Appleton Electronics and have been assigned to audit the accounts payable account for Appleton Electronics, a wholesaler of hardware equipment. You are the continuing auditor and you assume that the company has good internal controls and is not designated as a high risk-audit client. During the current audit, adjustments were made regarding accounts payable, but one of them was considered material. This adjustment related to the capitalisation of expenditure not yet paid. You decided that the amount will have a significant impact on the financial results and therefore booked an adjustment to be made. However the CEO and CFO of Appleton insisted that capitalizing the amount was the correct treatment and that in this particular case, departing from the standard was warranted in order to present a true and fair view of that transaction. You explained to both of them that departing from the applicable accounting standard was not warranted in this case. REQUIRED: a. Identify two financial statement assertions that relate to accounts payable. For each assertion identified, list two types of audit evidence that would address the assertion and two procedures used to gather the audit evidence. Organise your answer as follows: Financial Statement- Audit Evidence Procedure Assertion (10 marks) b. Discuss the likely impacts of not making the material adjustment, on the financial results for the year under audit and on the future of Appleton Electronics. (5 marks) C. Discuss in detail the type of opinion you are likely to issue in the above situation, giving the reasons for issuing such an opinion. (5 marks)

Answer rating: 100% (QA)

a Financial statement assertion Audit evidence Procedure Accounts payable is in existence Confirmati... View the full answer