Question
You are the audit manager of a local CPA firm who is responsible for the financial statements audit of the following three clients, all of
You are the audit manager of a local CPA firm who is responsible for the financial statements audit of the following three clients, all of them are having 31 March 2022 as their financial year end: (a) Big Limited You expect that the audit will be finalized and the auditors report be signed on 11 August 2022. Today is 28 July 2022, you have just identified that there is an invoice from a computer supplier of $2.6 million, which Adam did not book at year end. It is related to the design and installation of computer network for the office. The whole network and software was fully installed and implemented properly before 31 March 2022 but just that the billing was delayed. A net profit of $10 million was reported for the year. Required: In relation to the above, explain your understanding about the type of the event and your responsibility towards it. (7 marks) (b) Large Limited During the year, your client experienced a change in its controlling shareholder. The new controlling shareholder refocused the business to catering operations and discontinued its logistics business through disposal of certain subsidiaries. All the books and records of the subsidiaries disposed of were no longer retained by your client. The accounts department managed to keep certain management reports of the disposed companies up to the date of disposal. Information from these reports was extracted to prepare the disclosure notes on the discontinued business in the financial statements of your client in accordance with the relevant accounting standards. The audit team considers that the magnitude of the discontinued business to be material and that sufficient appropriate evidence for these disclosure note is not available. Required: Suggest an appropriate audit opinion to be prepared. Explain your reasons. (5 marks) (c) Giant Limited The company is required to submit the audited financial statements to the bankers for their review of renewal of banking facilities by 15 April 2022. In view of the tight deadline, you are considering to carry out a hard-close audit. Required: Explain what a hard-close audit is and what its differences from an interim visit are. (6 marks)
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