3:38 Assessment 1 Individual S3 2324 (... You are the audit manager in charge of the audit of Caro Ltd. The company's year-end is 31 December, and Caro has been a client for six years. The company purchases and resells products for the energy industry including valves, fittings, pumps etc. Clients vary in size from small operators to large companies. No manufacturing takes place in Caro. Information on the company's financial performance is available as follows: 2017 Forecast $'000 Revenue Cost of sales Gross profit Administration costs Distribution costs Net profit 50,440 (40,918) 9522 (5194) (2,500) 1828 2016 Actual $'000 44,825 (32,874) 11951 (4,952) (2,500) 4499 Non-current assets (at net book value) 4200 Current assets Inventory Receivables Cash and bank Total assets 250 6500 550 11500 Capital and reserves Share capital Accumulated profits Total shareholders' funds Non-current liabilities 1000 $500 6500 1500 4900 1478 4552 1790 12720 1000 6574 7574 2258 Current liabilities 3500 11500 2888 12720 Other information • The industry that Caro trades in has seen moderate growth of 6% over the last year. • Non-current assets mainly relate to company premises for storing inventory. Eight delivery vehicles are owned with a net book value of $500,000. • One of the directors purchased a pump during the year. • Inventory is stored in ten different locations across the country, with your firm having offices close to seven of those locations. • A computerised inventory control system was introduced in August 2017. Inventory balances are now obtainable directly from the computer system. The client does not intend to count inventory at the year-end but rely instead on the computerised inventory control system. Required By reference to the information provided above, prepare the audit strategy for Caro for the year ending 31 December 2017. Including a thorough discussion, identification and analysis of Scope of audit, Timing, Materiality, Risk areas, Audit approach.

3:38 Assessment 1 Individual S3 2324 (... You are the audit manager in charge of the audit of Caro Ltd. The company's year-end is 31 December, and Caro has been a client for six years. The company purchases and resells products for the energy industry including valves, fittings, pumps etc. Clients vary in size from small operators to large companies. No manufacturing takes place in Caro. Information on the company's financial performance is available as follows: 2017 Forecast $'000 Revenue Cost of sales Gross profit Administration costs Distribution costs Net profit 50,440 (40,918) 9522 (5194) (2,500) 1828 2016 Actual $'000 44,825 (32,874) 11951 (4,952) (2,500) 4499 Non-current assets (at net book value) 4200 Current assets Inventory Receivables Cash and bank Total assets 250 6500 550 11500 Capital and reserves Share capital Accumulated profits Total shareholders' funds Non-current liabilities 1000 $500 6500 1500 4900 1478 4552 1790 12720 1000 6574 7574 2258 Current liabilities 3500 11500 2888 12720 Other information • The industry that Caro trades in has seen moderate growth of 6% over the last year. • Non-current assets mainly relate to company premises for storing inventory. Eight delivery vehicles are owned with a net book value of $500,000. • One of the directors purchased a pump during the year. • Inventory is stored in ten different locations across the country, with your firm having offices close to seven of those locations. • A computerised inventory control system was introduced in August 2017. Inventory balances are now obtainable directly from the computer system. The client does not intend to count inventory at the year-end but rely instead on the computerised inventory control system. Required By reference to the information provided above, prepare the audit strategy for Caro for the year ending 31 December 2017. Including a thorough discussion, identification and analysis of Scope of audit, Timing, Materiality, Risk areas, Audit approach.

3:38 Assessment 1 Individual S3 2324 (... You are the audit manager in charge of the audit of Caro Ltd. The company's year-end is 31 December, and Caro has been a client for six years. The company purchases and resells products for the energy industry including valves, fittings, pumps etc. Clients vary in size from small operators to large companies. No manufacturing takes place in Caro. Information on the company's financial performance is available as follows: 2017 Forecast $'000 Revenue Cost of sales Gross profit Administration costs Distribution costs Net profit 50,440 (40,918) 9522 (5194) (2,500) 1828 2016 Actual $'000 44,825 (32,874) 11951 (4,952) (2,500) 4499 Non-current assets (at net book value) 4200 Current assets Inventory Receivables Cash and bank Total assets 250 6500 550 11500 Capital and reserves Share capital Accumulated profits Total shareholders' funds Non-current liabilities 1000 $500 6500 1500 4900 1478 4552 1790 12720 1000 6574 7574 2258 Current liabilities 3500 11500 2888 12720 Other information • The industry that Caro trades in has seen moderate growth of 6% over the last year. • Non-current assets mainly relate to company premises for storing inventory. Eight delivery vehicles are owned with a net book value of $500,000. • One of the directors purchased a pump during the year. • Inventory is stored in ten different locations across the country, with your firm having offices close to seven of those locations. • A computerised inventory control system was introduced in August 2017. Inventory balances are now obtainable directly from the computer system. The client does not intend to count inventory at the year-end but rely instead on the computerised inventory control system. Required By reference to the information provided above, prepare the audit strategy for Caro for the year ending 31 December 2017. Including a thorough discussion, identification and analysis of Scope of audit, Timing, Materiality, Risk areas, Audit approach.

FINANCIAL ACCOUNTING

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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3:38 Assessment 1 Individual S3 2324 (... You are the audit manager in charge of the audit of Caro Ltd. The company's year-end is 31 December, and Caro has been a client for six years. The company purchases and resells products for the energy industry including valves, fittings, pumps etc. Clients vary in size from small operators to large companies. No manufacturing takes place in Caro. Information on the company's financial performance is available as follows: 2017 Forecast $'000 Revenue Cost of sales Gross profit Administration costs Distribution costs Net profit 50,440 (40,918) 9522 (5194) (2,500) 1828 2016 Actual $'000 44,825 (32,874) 11951 (4,952) (2,500) 4499 Non-current assets (at net book value) 4200 Current assets Inventory Receivables Cash and bank Total assets 250 6500 550 11500 Capital and reserves Share capital Accumulated profits Total shareholders' funds Non-current liabilities 1000 $500 6500 1500 4900 1478 4552 1790 12720 1000 6574 7574 2258 Current liabilities 3500 11500 2888 12720 Other information • The industry that Caro trades in has seen moderate growth of 6% over the last year. • Non-current assets mainly relate to company premises for storing inventory. Eight delivery vehicles are owned with a net book value of $500,000. • One of the directors purchased a pump during the year. • Inventory is stored in ten different locations across the country, with your firm having offices close to seven of those locations. • A computerised inventory control system was introduced in August 2017. Inventory balances are now obtainable directly from the computer system. The client does not intend to count inventory at the year-end but rely instead on the computerised inventory control system. Required By reference to the information provided above, prepare the audit strategy for Caro for the year ending 31 December 2017. Including a thorough discussion, identification and analysis of Scope of audit, Timing, Materiality, Risk areas, Audit approach.

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Audit strategy must include: Characteristics of the engagement (Scope) Timing of reporting Materiality Risk assessment procedures performed Audit approach
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You are an audit senior at Digby and Co and are completing the audit of ABC Ltd for the year-ended 31 December 2022. The following items are outstanding: On 2 January 2023, Golf is Us, a major customer of ABC, was placed into administration owing £211,000. On 3 January 2022, the sales director left the company. The sales director is suing ABC for constructive dismissal. If successful, the claim amounts to £280,000. On 5 February 2023 there was a fire at the premises of the third party warehouse provider, which destroyed all inventory held there. Approximately one half of ABC's inventory was stored in these premises. The total value of inventory stored at the premises was £1,054,000. The financial statements include a £40,000 provision for an unfair dismissal case brought by an ex-employee of ABC. On 7 February 2023 a letter was received from the claimant's solicitors stating that they would be willing to settle out-of-court for £25,000. It is likely the company will agree to this.…

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