Assignment Details The audit partner views the TIPL audit as a very low risk engagement because of the strong management control and supervision of operations in the business that have historically been QUESTION 1 (20 MARKS) exerted by the experienced management team. >During the IT system changeover, the inventory tracking module did not work when the system PART A (16 MARKS) went live. As a result, manual inventory tracking procedures needed to be used for one month. Assume you are Julius Pontius, the audit manager at David & Co Chartered Accountants (DCCA) in >Many long-standing employees have left TIPL as a result of changes that they deemed overly charge of the financial statement audit of Toys International Pty Ltd (TIPL). complex. None of these resignations was above middle management level. TIPL is a toy wholesaler to both retail outlets and educational institutions. Over the last eight years of being an audit client of DCCA, TIPL has grown at a steady pace. However, during the current REQUIRED: financial year, sales have doubled, mainly as a result of the market leader in the toy wholesaling industry collapsing amid the global financial crisis (GFC). (a) Prepare a memo for the audit partner outlining the results of preliminary enquiries and analysis with respect to the planning of the TIPL 2022 year-end audit. (12 marks) As a result of the sudden increase in demand, the following changes have taken place in the business: (b) Describe the impact of APES Standards on the planning of your audit. (4 marks) Product lines have more than doubled, with TIPL importing the majority of stock for the first time. >Warehousing of stock has been decentralised, with TIPL now operating five warehouses PART B (4 MARKS) around Australia, rather than the single warehouse it previously maintained near its offices in Melbourne. Alex Gaston is a partner in an accounting firm in Sydney. Alex Gaston is currently looking at his portfolio of new Australian clients which include: TIPL's IT system was replaced during the year. Previously, TIPL operated an off-the-shelf package with minor modifications. The new system is a specialised system that was designed 1. Plates Superannuateon Fund, a corporate fund that manages superannuateon and pension and built specifically for TIPL. The new system lets TIPL operate a true e-commerce system, plans for the 20,000 employees of Plates. allowing automatic re-order of stock by customers' systems, and fully automated invoicing 2. Fork, a statutory fund maintained under the Life Insurance Act 1995. The IT system is considered one of the best of its kind in the country and, due to its 3. complexity, came at a large cost to TIPL. Future enhancements would need to be contracted Spoon, a small company limited by guarantee, with consolidated revenue of less than $1 out, as TIPL does not have the skills in-house to alter the system. million per annum. 4. Tables & Chairs, a company listed on the Australia Securities Exchange. > As a result of the rapid growth in TIPL's operations, staff numbers have almost doubled in the past year. REQUIRED: You have been allocated the task of planning the audit for the year ending 30 June 2022. From your prior year file review and discussions with TIPL's management, you note the following: For each entity, identify if is required (not required) to be audited under the Corporations Act 2001. Justify your answer. (4 marks) The senior levels of your audit team are very experienced in dealing with TIPL - both the audit partner and yourself have completed the engagement for the last five years. > For each of the years that TIPL has been an audit client of DCCA, it has received an unmodified opinion. >Substantial reliance has been placed on the TIPL internal control system for the last two years and in a brief conversation with you in the office hallway, the TIPL audit partner said that he expects that DCCA should be able to place substantial reliance on internal controls at TIPL again for this year-end's audit. Preliminary analytical procedures around accounts receivable balances indicate that TIPL is not collecting its accounts receivable balances in a timely manner; days sales outstanding has increased from 45 days to 59 days year-on-year