Question 1

You are the audit senior on the audit of Things Pty Ltd, a large manufacturing company, for the year ended 30 June 2020. It is now 25 August 2020 and you are reviewing the audit working papers prepared by the audit assistant, Jennifer Jones, and notice the following matters:

a)As part of Jennifer's work on subsequent events, Jennifer noted that there were a large percentage of returns for Product 75L in July. However, as this product was first sold in June and represented only 1% of sales for the year, Jennifer concluded that the amount was immaterial, and no further work was necessary.

b)Advertising expenses are material, although only 50% of last year's balance. Jennifer selected a large sample of entries and agreed them to supporting documents. No errors were found. Jennifer concluded that advertising expenses was reasonable.

Required:

For each matter, indicate whether you agree that sufficient appropriate audit evidence has been obtained to support the conclusions reached. Discuss three reasons for your decision.