Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are the audit senior on the audit of Harmony Pty Ltd, a large manufacturing company, for the year ended 30 June 2017. It is

image text in transcribed

You are the audit senior on the audit of Harmony Pty Ltd, a large manufacturing company, for the year ended 30 June 2017. It is now 25 August, 2017 and you are reviewing the audit working papers prepared by your audit assistant, Susan Jones, and notice the following matters: (a) Susan attended the stocktake on 30 June and observed that the client followed the stocktake instructions. She selected numerous items for test inventory from the client's inventory sheets and all were found to be correct. Cut-off details were noted and subsequently checked and found to be correctly treated. Susan concluded that inventory was fairly stated. (b) Susan selected 20 invoices to test the control that the sales clerk checks that prices agree with the authorised price list. She found 3 instances where the sales clerk had not signed the "prices checked" box in the invoice. The sales manager explained that the sales clerk always checks the prices but sometimes forgets to sign the box. As the prices on all the invoices agreed with the authorised price list, Susan concluded that the control was operating satisfactorily. (c) As part of her work on subsequent events, Susan noted that there were a large number of returns in July of Product 75L. However, as this product was first sold in June and represented only 1% of sales for the year, Susan concluded that the amount was immaterial and no further work was necessary. (d) Advertising expenses are material, although the expenses this year are only half (50%) of last year's balance for advertising expenses. Susan selected a large sample of entries and agreed them to supporting documents. No errors were found. Susan concluded that advertising expenses was reasonable. (e) As part of the verification work on accounts payable, Susan carried out a search for unrecorded liabilities. She tested a random sample of 20 payments made after 30 June, 2017 and found 3 instances of payments that related to services provided in June, which had not been accrued. However, as the total of the 3 payments was immaterial, she concluded that no adjustment was required for unrecorded liabilities. Required: For each of the five scenarios presented above, indicate whether you believe that sufficient appropriate audit evidence has been obtained to support the conclusions reached. Give reasons for your decision. Please note, the scenarios are related. [10 ml

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

Financial Accounting And Reporting

Authors: Barry Elliott, Jamie Elliott

13th Edition

0273730045, 978-0273730040

More Books

Students also viewed these Accounting questions

Question

Use Nortons Theorem to find Vo in the network shown 20001x KA Ix

Answered: 1 week ago

Question

Describe specific developments that advanced cognitive psychology.

Answered: 1 week ago

Question

differentiate the function ( x + 1 ) / ( x ^ 3 + x - 6 )

Answered: 1 week ago