Question 7 (5 marks)

As the chief financial officer of Adventure Games Ltd, you discover a significant misstatement that results in an overstatement of assets in this years financial statements. The misleading financial statements are contained in the companys annual report, which is to be issued by banks and other creditors.

The managing director is aware of the significant misstatement and suggests not to adjust the current financial statements but rather the adjustment be made in next years financial statements when profits are expected to be much higher.

Required:

State the ethical issues that are of concern to you and briefly discuss what would you do as the chief financial officer?

Question 9 (5 marks)

Kirsty Plenty owns Plenty Linen Hire. Kirsty asks you to explain how the following differences between the bank statement and the cash at bank ledger account should be treated:

1. an entry on the bank statement for a dishonoured cheque,
2. unpresented cheques, and
3. an outstanding deposit.