Scenario # 1

Following the disappearance of the finance director, your investigations have indicated that sales remittances amounting to $50,000 have been misappropriated. In addition, paid cheques, petty cash records and certain payment vouchers are missing. Management was reluctant to see investigations continue, as they saw their main priority being to restore the liquidity of the company (the fraud has not caused the liquidity problem). Moreover upon several reminders, the information related to Other Receivables has not provided to auditor by management, other receivables are reported at $75,000 in Financial Statements.

Scenario # 2

Delta Technologies & Appliances is one of the audit clients of your firm. Amid technological developments, the demands & trends in technology and appliances market has been volatile. Delta Tech has scored significantly higher level of sales of Television, but dramatic decrease in sales of air conditioner. During discussion with client management & sales director, it was revealed that air conditioners industry has just experienced a significant technology change. Management assumes that Delta would be able to sell its air conditioning stock at actual market price.

Requirement:

Assuming that you are Partner/Audit Manager of said Audit Firm. Please discuss the reporting implications (on audit report) of above mentioned scenarios.