Scenario 1: Polylex Realty Inc.

You are engaged to conduct the audit of the December financial statements of Polylex Realty Inc. Polylex rents apartments to executives often for long-term stays. Many of the rentals are for six to 12 months and are prepaid by the executive's employer for the period. At year end, there was a material balance of deferred revenue related to prepaid rental apartments showing on the balance sheet.

Scenario 2: Bose Construction Inc.

Bose Construction Inc. makes custom homes for consumers in the Vernon, B.C., area. Customers will choose the design, materials, and finishings, which are then written into a contract. Included in the contract are details of construction deadlines, invoicing and payment (or construction draws), frequency, and other terms. Under normal circumstances, the title of the house is transferred to the customer when the occupancy permit is issued.At year end, Bose has a number of projects that are in process; they use the proportion of costs incurred to total estimated costs (i.e., cost to cost) to calculate the percentage completion.

Scenario 3: Raintree Distribution Inc.

You are engaged in the year-end audit of Raintree Distribution Inc. Raintree sells magazines to newsstands and other retailers with a one-month right of return. For example, a retailer can return magazines that are sold in December to Raintree for a full refund until the end of January of the next year. Raintree's year end is December 31. On average, the amount of returns is considered material.

Scenario 4: Best Dealership Inc.

You are the audit junior on the Best Dealership Inc. (BDI) year-end financial statement audit. BDI sells luxury automobiles on Vancouver's posh west side. The company's year end is June 30. In the automobile industry, June is an important month to clear out old inventory and make way for the next year's models. As such, there are a number of promotions running then, and the sales people try hard to close deals before the end of the month.

Required:

For each scenario, outline the following:

• risk for the financial statements
• account(s) and assertion(s) impacted
• procedure to perform