Question
As the auditor of Maisha Clouds, a software firm in Colchester, Simon Accountants is concerned about the liability accounts of the company. Following some unusual
As the auditor of Maisha Clouds, a software firm in Colchester, Simon Accountants is concerned about the liability accounts of the company. Following some unusual changes in the liability accounts, the amount of total liability has decreased by 12% compared to that in the previous year. Yet the company has experienced a growth in terms of scope and scale of operations. The auditors are somewhat sceptical and wish to check whether there are any unrecorded liabilities. | |||
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| a. | Discuss FIVE audit procedures for unrecorded liabilities. Support your answer with example(s). | |
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Marina Accountants is the auditor for Byron Bay Manufacturers Limited in 2019 for the year ended on December 31, 2018. Byron Bay has a policy of returning goods when customers are dissatisfied with a product within a particular period beyond the date of purchase. The cost of refunds is probable and is estimated to be 950,000 on December 31, 2018. Although this amount is considered material, the company, however, did not make any provision in the statements. | |||
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| b. | Discuss what Marina Accountants should recommend Byron Bay in such circumstances. | |
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c. | Discuss FOUR directions of UK GAAP regarding the treatment of contingent liabilities. | ||
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| d. | Discuss the criteria for treating contingencies. Support your answer with example(s). | |
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