Jamee Company is a food company based in Shah Alam selling its products to the supermarkets. You as an audit manager are in charge of the company. From your review of the audit working papers, you have noted that the level of materiality was determined to be RM 2 million at the early stage, and this materiality threshold has been used throughout the audit. There is no evidence on the audit file that this threshold has been reviewed during the course of the audit. From your review of the audit planning, you know that a new packing machine with a cost of RM 1.6 million was acquired by the company in March 2018, and is recognised in the draft statement of financial position at a carrying amount of RM 1.9 million at 31 December 2018. The packing machine is located at the premises of Alan Co, a distribution company which is a subsidiary of Jamee and used to pack and distribute a significant proportion of Jamee's products. The machine has not been physically verified by a member of the audit team. The audit working papers conclude that *we have obtained the purchase invoice and order in relation to the machine, and therefore can conclude that the asset is appropriately valued and that it exists. In addition, the managing director of Alan Co has confirmed in writing that the machine is located at their premises and is in working order. No further work is needed in respect of this item. Inventory is recognised at RM 2 million in the draft statement of financial position. You have reviewed the results of audit procedures performed at the inventory count, where the test counts performed by the audit team indicated that the count of some items performed by the company's staff were not correct. The working papers state that the inventory count was not well organised and concluded that however, the discrepancies were immaterial, so no further action is required'. The audit senior spoke to you yesterday, voicing some concerns about the performance of the audit. A summary of his comments is shown below: 'The audit manager and audit engagement partner came to review the audit working papers on the same day towards the completion of the audit fieldwork. The audit partner asked me if there had been any issues on the sections of the audit which I had worked on, and when I said there had been no problems, he signed off the working papers after a quick look through them. When reading the company's board minutes, I found several references to the audit engagement partner, Jack Kane. It appears that recommended that the company use the services of his brother, Noah Kane for advice on business development, as Noah is a management consultant. Based on that recommendation, Noah has provided a consultancy service to Jamee since March 2018. I mentioned this to Jack, and he told me not to record it in the audit working papers or to discuss it with anyone.' Required: MID TERM a. Comment on the quality of the audit performed discussing the quality control, ethical and professional issues raised and provide recommendations. [20 marks)
