(a) On 30 June, Gillian attended the inventory stocktake and observed that the client followed the stocktake instructions. She selected numerous items for test counting from the client's inventory sheets and all were found to be correct. Cut-off details were noted and subsequently checked and found to be treated correctly. Abdur Rahman concluded that the inventory was fairly stated. (b) Abdur Rahman selected 20 invoices to test the control that the sales clerk checks that the prices agree with the authorised price list. She found three instances where the sales clerk had not signed the prices checked' box on the invoice. The sales manager explained that the sales clerk always checks the prices, but sometimes forgets to sign the box. As the prices on all the invoices agreed with the authorised price list, Abdur Rahman concluded that the control was operating satisfactorily. (c) As part of her work on subsequent events since balance date, Abdur Rahman noted that there were a large number of returns in July of product XLP. However, as this product was first sold in June and represented only 1 per cent of sales for the year, she concluded that the amount was immaterial and that no further work was necessary. (d) Advertising expenses are material, although only 50 per cent of last year's balance. Abdur Rahman selected a large sample of entries and agreed them to supporting documents. No errors were found. Abdur Rahman concluded that advertising expenses were reasonable. (e) As part of the verification work on accounts payable, Abdur Rahman carried out a search for unrecorded liabilities. She tested a random sample of 20 payments made after 30 June 2018 and found three instances of payments that related to services provided in June that had not been accrued at 30 June 2018. However, as the total of the three payments was immaterial, she concluded that no adjustment was required for unrecorded liabilities. Required: For each of the five scenarios presented above, indicate whether you believe that sufficient appropriate audit evidence was obtained to support the conclusions reached. Give reasons for your decision. (a) On 30 June, Gillian attended the inventory stocktake and observed that the client followed the stocktake instructions. She selected numerous items for test counting from the client's inventory sheets and all were found to be correct. Cut-off details were noted and subsequently checked and found to be treated correctly. Abdur Rahman concluded that the inventory was fairly stated. (b) Abdur Rahman selected 20 invoices to test the control that the sales clerk checks that the prices agree with the authorised price list. She found three instances where the sales clerk had not signed the prices checked' box on the invoice. The sales manager explained that the sales clerk always checks the prices, but sometimes forgets to sign the box. As the prices on all the invoices agreed with the authorised price list, Abdur Rahman concluded that the control was operating satisfactorily. (c) As part of her work on subsequent events since balance date, Abdur Rahman noted that there were a large number of returns in July of product XLP. However, as this product was first sold in June and represented only 1 per cent of sales for the year, she concluded that the amount was immaterial and that no further work was necessary. (d) Advertising expenses are material, although only 50 per cent of last year's balance. Abdur Rahman selected a large sample of entries and agreed them to supporting documents. No errors were found. Abdur Rahman concluded that advertising expenses were reasonable. (e) As part of the verification work on accounts payable, Abdur Rahman carried out a search for unrecorded liabilities. She tested a random sample of 20 payments made after 30 June 2018 and found three instances of payments that related to services provided in June that had not been accrued at 30 June 2018. However, as the total of the three payments was immaterial, she concluded that no adjustment was required for unrecorded liabilities. Required: For each of the five scenarios presented above, indicate whether you believe that sufficient appropriate audit evidence was obtained to support the conclusions reached. Give reasons for your decision
