You are the audit senior at Brown & Associates and have been assigned to the audit...

 

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You are the audit senior at Brown & Associates and have been assigned to the audit of Location Ltd (Location) lot the year ended 30 June 2020. Location manufactures GPS navigation systems for motor vehicles and exports these to car manufacturers in South Korea and Japan. The South Korean market has grown rapidly over the past two years and has become the company's most significant customer base, representing 75 per cent of Location's revenue. All contracts are payable in US dollars. In the past three months, the volume of orders from Location's South Korean customers has fallen 20 per cent, and two major customers have requested extended payment terms. Location is also under pressure from Chinese competitors who have undercut Location's prices by 35 per cent. REQUIRED a) Identify one key assertion that may be at risk for both inventory and accounts receivable accounts and explain why. b) For each of the assertions you identified above, recommend one specific substantive test of detail that would be most responsive to the risk identified. You are the audit senior at Brown & Associates and have been assigned to the audit of Location Ltd (Location) lot the year ended 30 June 2020. Location manufactures GPS navigation systems for motor vehicles and exports these to car manufacturers in South Korea and Japan. The South Korean market has grown rapidly over the past two years and has become the company's most significant customer base, representing 75 per cent of Location's revenue. All contracts are payable in US dollars. In the past three months, the volume of orders from Location's South Korean customers has fallen 20 per cent, and two major customers have requested extended payment terms. Location is also under pressure from Chinese competitors who have undercut Location's prices by 35 per cent. REQUIRED a) Identify one key assertion that may be at risk for both inventory and accounts receivable accounts and explain why. b) For each of the assertions you identified above, recommend one specific substantive test of detail that would be most responsive to the risk identified.

Answer rating: 100% (QA)

Accounts at risk Inventory Assertion Accuracy valuation and allocation Explanation Inventory is at r... View the full answer