Fixed Assets and Risk of Misstatement You are an auditor for Teper and Lubetsky and you have recently examined the Fixed Asset continuity schedule of Xuan Inc. The company reports under the IFRS financial reporting framework. You have made the following notes to yourself based on your investigation: 1. Most fixed assets listed on the continuity schedule are in regular, productive use in Xuan but there were two assets that were obsolete that were also listed on the fixed assets continuity schedule. 2. All additions to fixed assets and disposals of fixed assets were properly recorded on the continuity schedule. 3. Payments made for work performed on all fixed assets for the purpose of keeping the assets operating at their intended use and life (but with no improvement to the usefulness or extension to the life) were recorded as capitalized amounts added to the fixed asset accounts. 4. Payments made for work performed on all fixed assets for the purpose of extending the life or expanding the capacity of the assets were capitalized and thereby recorded as addition to the fixed asset accounts. 5. Upon purchase of all fixed assets, the installation and freight costs that were used to bring the asset to its state of intended use were capitalized as part of the cost of the asset. 6. Upon acquisition, all Leases for major equipment at Xuan were recorded as a Capital Lease and therefore a fixed asset was established in Xuan's accounts. REQUIRED: [A] Identify two instances of incorrect application of the financial reporting framework, leading to the risk of misstatement in Xuan's financial statements. [B] For the two instance in part [A], briefly describe the nature and cause of the potential misstatement. STUDENT RESPONSE BELOW: Paragraph B I U A + v 52 11