You are an Auditor working on the year-end 2019 audit of A&B Ltd. A&B Ltd is a publicly listed company which produces, distributes and sells mens and womens clothing in all of the capital cities of Australia. A&B Ltd currently has approximately 75% of the childrens clothing market. As part of its customer service policies, customers can receive a full refund within 60 days of the purchase of goods.

A&B Ltd manufactures all of its clothing in Bangladesh, apart from its high-end boutique ladies range, which is imported directly from Italy. A&B Ltd also distributes its clothing in exclusive concession areas of department stores as well as small shops in suburban strip malls.

On 16 July 2019 whilst completing the audit of A&B Ltd, the graduate auditor shows you an online news report which exposes A&B Ltds poor health and safety record and low wage levels for its workers in developing countries. The news report includes graphic photos of exhausted workers in poorly constructed buildings. The article also notes that a high profile consumer action group has recently submitted a petition to parliament raising this issue with 10,000 signatures and it has called for national boycotts.

Based on your discussions with the CFO, he has revealed that a lot of customers have been returning their clothes in the last three months, including clothing purchased in department stores. As at 30 June 2019, the CFO estimates, out of the total clothing sales recorded, 50% of those which are still eligible for a full refund, are expected to be returned.

Required:

Based on the situation described above, identify three (3) accounts which are likely to be affected by this negative news report. For each of the accounts identified, provide two (2) financial report assertions and explain how the account relates to the assertions you have selected.

Please provide your answer in the following format. (15 marks)

Accounts

Key Assertions

Explanation

You are an Auditor working on the year-end 2019 audit of A&B Ltd. A&B Ltd is a publicly listed company which produces, distributes and sells mens and womens clothing in all of the capital cities of Australia. A&B Ltd currently has approximately 75% of the childrens clothing market. As part of its customer service policies, customers can receive a full refund within 60 days of the purchase of goods.

A&B Ltd manufactures all of its clothing in Bangladesh, apart from its high-end boutique ladies range, which is imported directly from Italy. A&B Ltd also distributes its clothing in exclusive concession areas of department stores as well as small shops in suburban strip malls.

On 16 July 2019 whilst completing the audit of A&B Ltd, the graduate auditor shows you an online news report which exposes A&B Ltds poor health and safety record and low wage levels for its workers in developing countries. The news report includes graphic photos of exhausted workers in poorly constructed buildings. The article also notes that a high profile consumer action group has recently submitted a petition to parliament raising this issue with 10,000 signatures and it has called for national boycotts.

Based on your discussions with the CFO, he has revealed that a lot of customers have been returning their clothes in the last three months, including clothing purchased in department stores. As at 30 June 2019, the CFO estimates, out of the total clothing sales recorded, 50% of those which are still eligible for a full refund, are expected to be returned.

Required:

Based on the situation described above, identify three (3) accounts which are likely to be affected by this negative news report. For each of the accounts identified, provide two (2) financial report assertions and explain how the account relates to the assertions you have selected.

Please provide your answer in the following format. (15 marks)

Accounts

Key Assertions

Explanation

You are an Auditor working on the year-end 2019 audit of A&B Ltd. A&B Ltd is a publicly listed company which produces, distributes and sells men's and women's clothing in all of the capital cities of Australia. A&B Ltd currently has approximately 75% of the children's clothing market. As part of its customer service policies, customers can receive a full refund within 60 days of the purchase of goods. A&B Ltd manufactures all of its clothing in Bangladesh, apart from its high-end boutique ladies range, which is imported directly from Italy. A&B Ltd also distributes its clothing in exclusive concession areas of department stores as well as small shops in suburban strip malls. On 16 July 2019 whilst completing the audit of A&B Ltd, the graduate auditor shows you an online news report which exposes A&B Ltd's poor health and safety record and low wage levels for its workers in developing countries. The news report includes graphic photos of exhausted workers in poorly constructed buildings. The article also notes that a high profile consumer action group has recently submitted a petition to parliament raising this issue with 10,000 signatures and it has called for national boycotts. Based on your discussions with the CFO, he has revealed that a lot of customers have been returning their clothes in the last three months, including clothing purchased in department stores. As at 30 June 2019, the CFO estimates, out of the total clothing sales recorded, 50% of those which are still eligible for a full refund, are expected to be returned. Required: Based on the situation described above, identify three (3) accounts which are likely to be affected by this negative news report. For each of the accounts identified, provide two (2) financial report assertions and explain how the account relates to the assertions you have selected Please provide your answer in the following format. (15 marks) Accounts key Assertions Explanation