subject: AUDIT AND Assurance

Following matters were brought into your notice by the audit manager while doing the audit of Asian Polymer. I. The company bought Equipment for $1,500,000 from AH Ltd. Details of Non-current assets given by the company shows the asset was written as $150,000 and the depreciation was charged on the same amount. BRS (Bank Reconciliation Statement) show a difference of $1,350,000. However, the payment voucher $1,500,000 is supported by the invoice from AH Ltd. II. The records of the company show zero balance of material scrapped at the start & end of the year. However, the quantity of material scrapped during the year is materially different from the quantity of scrap sold. No reconciliation has been provided by the company for the difference III. The company sales were increases by 7% from last year. A member of the audit team discovered that sales of last 10 days of December represent 16% of the total sales. When the member further investigated the matter, he found out the following details 60% of the sales made in the last 10 days of December were to 3 new customers. There was no formally documented credit assessment of these new customers. a major portion of the sales made to these 3 customers were returned in the first week of January Companys operating performance is directly linked with management bonuses

Required: (a) Analyze each of the above situations and assess whether it represents a fraud or an error.

(b) What action would you take to deal with the above matters?