Your firm is the newly appointed external auditor for Tan Ltd (Tan) for the year ending...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Your firm is the newly appointed external auditor for Tan Ltd (Tan) for the year ending 31 July 2020. As the audit senior responsible for planning the audit of Tan, you have been asked by the engagement partner to take into consideration the following three areas of audit risk: Land and freehold factory - Plant and machinery Related party transactions Tan manufactures and sells plastic forks, spoons, knifes and plates to various EU counterparties. Sales are made in both, Sterling and Euros. Due to increased public awareness of the harmful effects of plastic products to the environment, Tan decided to invest in the development of new range of biodegradable products. The finance director of Tan, John Stones, has provided the below information: 1. Tan modified a number of its machinery in order to produce the new products. developed. The components purchased for the modification and the associated labour costs were included in Plant and machinery. Labour cost of modification was estimated based on timesheets completed by personnel. Some components were imported from Europe and paid at the local currency. 2. During the year ending 31 July 2020, Tan sold part of the land where the factory is located to Sava Ltd (Sava), which is owned exclusively (100%) by an executive director of Tan 3. Tan decided to recognize the value of its freehold factory and remaining land at its fair value for the first time on 31 July 2020. The valuation of the freehold factory and remaining land was conducted by Kinder Ltd (Kinder) firm of chartered surveyors. Maria Stones, John Stones wife serves as a partner at Kinder. 4. Tan depreciates plant and machinery over 10 years Internal control deficiencies identified within the year are as follows: - Tan normally provides a maximum of 10% discount to customers depending on the volume. of products ordered. During the year, it was discovered that for a number of contracts, discount in excess of 10% were provided - Tan has a component purchase process that involves identifying the component required, obtaining quotes from different suppliers included on an approved supplier list, and then placing an order with the cheaper supplier. Over the past year it was discovered that a number of orders were placed from suppliers not on the approved supplier list. Notes to the financial statements for the year ending 31 July 2020 (extract) Freehold Plant and factoy muchinery £'000 2.777 0 776 (30) 3.523 Cost/Fair value At 1 August 2019 Revaluaton Additions Disposals At 31 July 2020 Deprecition At 1 August 2019 Revaluaton Change for the year Disposals At 31 July 2020 Carrying amount 1 August 2019 At At 1 August 2018 Land £'000 9.100 2.600 0 (3.900) 7.800 - Land and freehold factory Plant and machinery -Related party transactions 0 ooooo 7.800 9.100 £'000 13.878 3.023 0 0 16.900 10.793 (10.793) 0 0 0 16.900 3.085 1.570 0 246 (13) 1.803 1.720 1.206 Requirements 1.1 Describe items to be considered while determining the members of the audit team to complete the audit engagement 1.2 Identify audit risks relating to the below areas and procedures to be implemented to address those risks: Your firm is the newly appointed external auditor for Tan Ltd (Tan) for the year ending 31 July 2020. As the audit senior responsible for planning the audit of Tan, you have been asked by the engagement partner to take into consideration the following three areas of audit risk: Land and freehold factory - Plant and machinery Related party transactions Tan manufactures and sells plastic forks, spoons, knifes and plates to various EU counterparties. Sales are made in both, Sterling and Euros. Due to increased public awareness of the harmful effects of plastic products to the environment, Tan decided to invest in the development of new range of biodegradable products. The finance director of Tan, John Stones, has provided the below information: 1. Tan modified a number of its machinery in order to produce the new products. developed. The components purchased for the modification and the associated labour costs were included in Plant and machinery. Labour cost of modification was estimated based on timesheets completed by personnel. Some components were imported from Europe and paid at the local currency. 2. During the year ending 31 July 2020, Tan sold part of the land where the factory is located to Sava Ltd (Sava), which is owned exclusively (100%) by an executive director of Tan 3. Tan decided to recognize the value of its freehold factory and remaining land at its fair value for the first time on 31 July 2020. The valuation of the freehold factory and remaining land was conducted by Kinder Ltd (Kinder) firm of chartered surveyors. Maria Stones, John Stones wife serves as a partner at Kinder. 4. Tan depreciates plant and machinery over 10 years Internal control deficiencies identified within the year are as follows: - Tan normally provides a maximum of 10% discount to customers depending on the volume. of products ordered. During the year, it was discovered that for a number of contracts, discount in excess of 10% were provided - Tan has a component purchase process that involves identifying the component required, obtaining quotes from different suppliers included on an approved supplier list, and then placing an order with the cheaper supplier. Over the past year it was discovered that a number of orders were placed from suppliers not on the approved supplier list. Notes to the financial statements for the year ending 31 July 2020 (extract) Freehold Plant and factoy muchinery £'000 2.777 0 776 (30) 3.523 Cost/Fair value At 1 August 2019 Revaluaton Additions Disposals At 31 July 2020 Deprecition At 1 August 2019 Revaluaton Change for the year Disposals At 31 July 2020 Carrying amount 1 August 2019 At At 1 August 2018 Land £'000 9.100 2.600 0 (3.900) 7.800 - Land and freehold factory Plant and machinery -Related party transactions 0 ooooo 7.800 9.100 £'000 13.878 3.023 0 0 16.900 10.793 (10.793) 0 0 0 16.900 3.085 1.570 0 246 (13) 1.803 1.720 1.206 Requirements 1.1 Describe items to be considered while determining the members of the audit team to complete the audit engagement 1.2 Identify audit risks relating to the below areas and procedures to be implemented to address those risks:
Expert Answer:
Answer rating: 100% (QA)
Question 1 Selecting audit team members is an important part of the preparation stage The overall responsibility for the selection of team members rests with the audit team leader However the audit te... View the full answer
Related Book For
Auditing Cases An Interactive Learning Approach
ISBN: 978-0133852103
6th edition
Authors: Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt
Posted Date:
Students also viewed these accounting questions
-
1. As friends of Anna you have been asked to assist her in the preparation of a recommendation. You are to prepare the following: 2. Write an executive summary to the CEO and the board supported by...
-
You are an auditor in Smit & Chandra, a mid-tier audit firm. Your firm is the incumbent auditor on Biotech Ltd, a pharmaceutical company. Since the previous audit, the company has listed on the...
-
Case Study: Quick Fix Dental Practice Technology requirements Application must be built using Visual Studio 2019 or Visual Studio 2017, professional or enterprise. The community edition is not...
-
It is possible to construct a nonparametric tolerance interval that is based on the extreme values in a random sample of size n from any continuous population. If p is the minimum proportion of the...
-
What responsibility does Nike have for conditions of workers at foreign factories making its products?
-
1. Construct an amortization schedule for a $1,000, 10 percent annual rate loan with 3 equal installments. 2. What is the annual interest expense for the borrower, and the annual interest income for...
-
Degree of reaction = _____/_____.
-
Tabares Corporation had these transactions during 2017. (a) Issued $50,000 par value common stock for cash. (b) Purchased a machine for $30,000, giving a long-term note in exchange. (c) Issued...
-
I think value pricing should be used since we are increasing product and service benefits while maintaining a reasonable price. Some products, price influences consumers perception of overall quality...
-
Shelby Shelving is a small company that manufactures two types of shelves for grocery stores. Model S is the standard model; model Lx is a heavy-duty version. Shelves are manufactured in three major...
-
Using the data given below, determine whether it would unusual for a household to have no HD televisions. The number of televisions (HD) per household in a small town 0 1 2 3 486 751 1310 0.187 0.289...
-
Nadeen Company manufactures nylon arm - band carriers for use with popular portable MP 3 devices. Variable costs are $ 1 2 per arm - band carrier, the price is $ 2 0 , and fixed costs are $ 8 0 , 0 0...
-
NutraLabs, Incorporated, leased a protein analyzer to Werner Chemical, Incorporated, on September 30, 2024. NutraLabs manufactured the machine at a cost of $5.35 million. The five-year lease...
-
Assume a restaurant chain is forced to pay damages to a person who suffered food poisoning after eating at the restaurant. What type of law is involved? Private law and civil law O Private law only...
-
What are some things in a child's background besides a physical or cognitive disability that can affect Birth to pre-K language development? Be sure to consider verbal as well as non-verbal...
-
5 ) Beginning in year 0 , with a payment of $ 5 0 , 0 0 0 , what is the present value of an asset in perpetuity that appreciates by 4 % each year and which is discounted at the rate of 6 % each year?...
-
Read the provided policy and procedure (for an Australian community service organisation), and provide the information to use in a PowerPoint presentation that will be for staff training in the ...
-
Modify the counter from Exercise 5.44 such that the counter will either increment by 4 or load a new 32-bit value, D, on each clock edge, depending on a control signal Load. When Load = 1, the...
-
The Committee of Sponsoring Organizations of the Treadway Commission (widely known as COSO) revised its Internal Control - Integrated Framework to update its guidance to reflect a number of...
-
Referring to Delmoss Watergrant's policy for evaluating control deficiencies, determine if the following three deficiencies represent a control deficiency, significant deficiency, or a material...
-
KPMG has publicly stated that the main accounting issues raised in the Xerox case do not involve fraud, as suggested by the SEC; rather they involve differences in judgment. (a) What is meant by the...
-
The chief goal of the private sector is effciency.Why? The primary focus of the public sector is equity. Why? It is quite possible to be highly effcient yet ineffective. It is also possible to be...
-
Why is healthcare reform such a contentious issue in the United States? Why have public and private efforts been unsuccessful in fully addressing the challenge of affordable health care? What role(s)...
-
Drawing on economic theory, what kinds of market failure underlie the worlds most pressing problems? Examine three examples: hunger, groundwater contamination, and literacy.
Study smarter with the SolutionInn App