Before Khalish completes the audit, critically analyse Bright Bhd.'s financial statements from situations 1 and 2.
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- QUESTION 3 Khalish is the auditor of Bright Bhd. preparing the final audit for the year ended 30 September 2021 and reviewing the audit working papers. Two issues summarised from the review are as follows: Situation 1: During the year, Bright Bhd. was named as a defendant in a suit for damages by its main supplier, Sunny Sdn. Bhd. for breach of contract. In October 2021, an adverse decision to Bright Bhd. was rendered, and it is required to pay RM2 million sum of damages to Sunny Sdn. Bhd. Situation 2: Bright Bhd. has acquired a new subsidiary, Metal Sdn. Bhd. to supply construction materials. The acquisition was taken place in October 2021, and the first transaction between them was carried out in early November 2021. The management claim that they did not disclose the information on the acquisition and transaction since both activities were carried out after the balance sheet date. In addition, the management keeps on giving excuses when asked about the management's written…Susan Wang is the audit partner for the financial report audit of Macro Ltd for the year ended 30 June 2021 .The Audit report is signed by the Auditor on 9th September,2021 and the financial statements are to be issued on 11th September, 2021.The following situations have occurred which could have an impact on the financial statements. a)On 23rd July, 2021, the company received a legal suit from Sputnik Ltd , a supplier seeking compensation due to a contract issue which Macro Ltd is disputing . b)On 5th August 2021 Macro Ltd had one of its major customers go bankrupt owing Macro an amount of $640,000 (a material amount).The customer Visin Ltd had incurred the debt on 2nd May 2021 and Macro had not heard from Visin Ltd since that date. c) On 7th September, 2021, the Board of Directors of the company agreed to make a…While completing your audit work for the 30 June 2022 audit of Bexca Ltd, you become aware of the following material matters: (i) On 5 July, Blue Pty Ltd, a major customer of Bexca Ltd, was placed into liquidation. As Blue Pty Ltd had confirmed the balance due to Bexca Ltd as at balance date, management of Bexca Ltd has refused to write off or provide for the Blue Pty Ltd account in the 30 June 2022 financial report. However, they are prepared to disclose this information as a note to the financial report. (ii) One of Bexca’ major customers, Leisure Pty Ltd, suffered a fire on 20 July. Since Leisure Pty Ltd was uninsured, it is unlikely that their accounts receivable balance will be paid. (iii) On 25 July, a well-known financial planner advised his clients not to invest in Bexca due to poor long-term growth prospects. The market price for Bexca’s shares subsequently declined by 40%. (iv) A note to the financial report of Bexca Ltd refers to an agreement to sell its major subsidiary,…
- While completing your audit work for the 30 June 2019 audit of Greenfield Ltd, you become aware of the following material matters: 1. On 5 July, Blue Pty Ltd, a major customer of Greenfield Ltd, was placed into liquidation. As Blue Pty Ltd had confirmed the balance due to Greenfield Ltd as at balance date, management of Greenfield Ltd has refused to write off or provide for the Blue Pty Ltd account in the 30 June 2019 financial report. However, they are prepared to disclose this information as a note to the financial report. II. On 15 July, Greenfield Ltd entered into a new contract to supply wine to Wine Taster, a major new wine store that had set up operations in northern South Australia. The contract was similar in nature to other contracts previously negotiated with other wine stores. Management does not believe that any change to the financial report is required. III. Greenfield Ltd has capitalised significant funds incurred in developing an improved new wine cap that allows the…Problem 1. You were engaged for the first time to audit the FS of Bebeko Corporation for the period ended December 31, 2020. The company started its operation in 2018. In reviewing the books, the auditor discovered that certain adjustments had either been overlook or improperly recorded at the end of years to 2020. Omissions and other failures for each year are summarized below: December 31 2018 2019 2020 1. Omissions of the following year-end accruals/deferrals: a. Accrued utilities expense b. Accrued interest income c. Prepaid rent expense d. Unearned royalty income |2. Delivery of merchandise at year-end to customers, recorded as sales upon collection the following year. 3. Receipt of merchandise at year-end from suppliers, recorded as purchases upon payment the following year. 4. Cash received from customers at year-end, recorded as sales deliveries yet to be made the following year. In the year of collection, corresponding 5000 7000 6000 2000 4000 3000 2000 1000 8000 3000 5000…1 views (A) As an auditor you are assigned to carry out the audit of the financial statements of Shine Cleaning Products Ltd for the year ended 31 March, 2019. You discover that two of the audit working files from the preceding year’s audit are missing. The preceding year’s audit was carried out by Ben Smith, who has already left the firm. You are concerned as you do not have much knowledge about cleaning products and this is only the second audit assignment for which you are responsible. You consult your manager and ask to be given more time to complete the audit. Required: (i) Discuss the significance of audit quality control. ASA220 (ISA 220) states that the audit firm should implement quality control policies and procedures at both audit firm level and individual audit level.…
- Oscar Wylee Women Glass Ltd is a supplier of fashion women sunglasses. The audit report for the year ended 30 June 2021 was signed on 8 August 2021, and the financial report was mailed to shareholders on 12 August. Requirement: Consider the following independent events. Assume that each event is material. For each of the individual misstatements listed, explain auditors' responsibility and consequence auditing report One of Oscar Wylee major customers, Phoenix Pty Ltd, suffered a fire on 23 July. Since Phoenix Pty Ltd was uninsured, it is unlikely that their accounts receivable balance will be paid. On 27 July, a well-known financial planner advised his clients not to invest in Oscar Wylee due to poor long-term growth prospects. The market price for Oscar Wylee Accessories' shares subsequently declined by 50%.While completing your audit work for the 30 June 2019 audit of Greenfield Ltd, you become aware of the following material matters: I. On 5 July, Blue Pty Ltd, a major customer of Greenfield Ltd, was placed into liquidation. As Blue Pty Ltd had confirmed the balance due to Greenfield Ltd as at balance date, management of Greenfield Ltd has refused to write off or provide for the Blue Pty Ltd account in the 30 June 2019 financial report. However, they are prepared to disclose this information as a note to the financial report. - DONE II. On 15 July, Greenfield Ltd entered into a new contract to supply wine to Wine Taster, a major new wine store that had set up operations in northern South Australia. The contract was similar in nature to other contracts previously negotiated with other wine stores. Management does not believe that any change to the financial report is required. DONE III. Greenfield Ltd has capitalised significant funds incurred in developing an improved new wine cap that…While completing your audit work for the 30 June 2019 audit of Greenfield Ltd, you become aware of the following material matters: I. On 5 July, Blue Pty Ltd, a major customer of Greenfield Ltd, was placed into liquidation. As Blue Pty Ltd had confirmed the balance due to Greenfield Ltd as at balance date, management of Greenfield Ltd has refused to write off or provide for the Blue Pty Ltd account in the 30 June 2019 financial report. However, they are prepared to disclose this information as a note to the financial report. II. On 15 July, Greenfield Ltd entered into a new contract to supply wine to Wine Taster, a major new wine store that had set up operations in northern South Australia. The contract was similar in nature to other contracts previously negotiated with other wine stores. Management does not believe that any change to the financial report is required. Required:For each independent situation, state the type of audit report that you should issue and give reasons for…
- Problem 1. You were engaged for the first time to audit the FS of Bebeko Corporation for the periodended December 31, 2020. The company started its operation in 2018. In reviewing the books, theauditor discovered that certain adjustments had either been overlook or improperly recorded at theend of years to 2020. Omissions and other failures for each year are summarized below:Below here were subsequent event that occurs in your client. Consider that all events were has material effect on client’s financial statement. The auditor is auditing financial statement for the year ended December 31, 2020 and is completing the audit in March 15, 2021.4) On February 15, 2021, the civil court decided that Client Company must pay compensation loss due to defect product sold to their customer. lawsuits started in court since June 20205) On February 20, 2021, a major of client customer which has large amount of outstanding A/R suddenly fill for bankruptcy6) On April 1, 2021 fire rage accident destroy client warehouse and the loss were materialQuestions:Indicate type 1 subsequent event, type 2 subsequent event, or not subsequent event. What kinds of action, client need to do? Adjust, disclose, or no need to do adjust/disclose for every point form 1) to 6). Provide the reason why it should be adjusted or disclose or neither.You are the audit senior on the audit of PXT Ltd for the yearended 31 January 2020. A former member of the auditengagement team for PXT Ltd left your firm two years ago totake up employment with this client.Identify and explain the potential threats to your firm’sobjectivity and independence when auditing PXT Ltd and listtwo factors you would consider when assessing thesignificance of these threats