Question
Sharon Mae is the audit manager of Dole & Company. You are currently reviewing the audit files for several of your clients, for which the
Sharon Mae is the audit manager of Dole & Company. You are currently reviewing the audit files for several of your clients, for which the audit fieldwork is complete. The audit seniors have raised the following issues:
Johnson and Brown Johnson and Brown is an asphalt company and has incurred research expenditure of $5.6m and development expenditure of $8.7m during the year. This has all been capitalised as an intangible asset. Profit before tax is $363m.
Bridge and Company The payroll information of Bridge and Company is backed up on a daily basis. With the change to the payroll software for a period of two months, the wages records and the back-ups have been corrupted, and therefore cannot be accessed. Wages and salaries for these two months are $31m. Profit before tax is $15m.
Required: Analysing each of the client files above:
(i) For each issue, discuss whether each is material to the audit; (10 marks)
(ii) If the above issues remain unresolved, describe the impact these would have on the audit reports. (10 marks)
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