Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are the Audit Manager responsible for the audit of Mega Chews Ltd, a company that runs a chain of fast food restaurants. You are

image text in transcribed

You are the Audit Manager responsible for the audit of Mega Chews Ltd, a company that runs a chain of fast food restaurants. You are aware that a major risk of this sector is that poor food quality might result in damages claimed by customers. You had satisfied yourself at the interim audit that the company's control risk as regards purchases of food and its preparation in the kitchen was low. However, during your final audit, it comes to your attention that one month before the year-end, a customer has sued the company for personal injury caused by food poisoning, claiming an amount of GH100,000 in compensation. This amount is material to the stated profit of the company, but management believes that it has good defenses against the claim. Required: (A) Recommend TWO controls that the company should have in place to reduce the risk associated with food purchases and their preparation in the kitchen. (11) State TWO audit procedures you should carry out during controls testing to satisfy yourself that control risk in this area is low (m) Explain TWO assertions relevant to accounts payable at the year-end date. In respect of the potential claim state THREE items of evidence you should obtain and explain how they might enable you to form a conclusion on the likelihood of the claim being successful (B) Following your audat, you have concluded that there is a possibility, but not a probability that the claim will be successful. However, management has decided not to make a provision or disclosure in the financial statements regarding this matter Required: Describe how the matter should be reported in the financial statements and explain the effect on your audit report

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Audit Value Factor Making Managements Head Turn Internal Audit And IT Audit Series

Authors: Daniel Samson

1st Edition

1138198129, 978-1138198128

More Books

Students also viewed these Accounting questions