Mr. Ali appointed as an auditor for the final audit of the Mazoon retail corporation for the year 2018, Oman. Mazoon retail corporation manufactures kids toy at lower cost. While performing the audit of the financial statement Mr. Ali have identified several information. Those are: 1. The total purchases of the company is recorded OMR 150,000. In that cash purchases OMR 50,000 and credit purchases are OMR 100,000. 2. the labour used for the production and marketing purposes are outsourced by the company. The total amount paid to the outsource company for utilizing the labour is OMR 95,000. 3. In the year 2018 company has achieved OMR 450,000 sales. Mr. James found that almost 70% of the sales are credit basis. 4. In the year 2018 the company has recorded the bad debts of OMR 5,000. 5. The company recorded OMR 2000 worth of the inventory are damaged and lost in transit Required: List and explain the types/methods of audit evidence gathered by Mr. Ali and comment on the persuasiveness (Reliability) of each type.

Mr. Ali appointed as an auditor for the final audit of the Mazoon retail corporation for the year 2018, Oman. Mazoon retail corporation manufactures kids toy at lower cost. While performing the audit of the financial statement Mr. Ali have identified several information. Those are: 1. The total purchases of the company is recorded OMR 150,000. In that cash purchases OMR 50,000 and credit purchases are OMR 100,000. 2. the labour used for the production and marketing purposes are outsourced by the company. The total amount paid to the outsource company for utilizing the labour is OMR 95,000. 3. In the year 2018 company has achieved OMR 450,000 sales. Mr. James found that almost 70% of the sales are credit basis. 4. In the year 2018 the company has recorded the bad debts of OMR 5,000. 5. The company recorded OMR 2000 worth of the inventory are damaged and lost in transit Required: List and explain the types/methods of audit evidence gathered by Mr. Ali and comment on the persuasiveness (Reliability) of each type.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Moranda and Sills, LLP, has served for over 10 years as the auditor of the financialstatements of Highland Credit Union. The firm is conducting its audit planning for the currentfiscal year and is in the process of performing risk assessment procedures. Based on inquiries andother information obtained, the auditors learned that the credit union is finalizing an acquisitionof a smaller credit union located in another region of the province. Management anticipatesthat the transaction will close in the third quarter, and, while there will be some challenges inintegrating the IT systems of the acquired credit union with Highland systems, the bank shouldrealize a number of operational cost savings over the long term.During the past year, the credit union has expanded its online service options for customers, who can now remotely deposit funds into and withdraw funds from chequing and savingsaccounts. The system has been well received by customers and the credit union hopes to continue…
The net income for 2018 reported by the accountant of OH MAH GAHD Company amounted to P634,500. Your audit of the accounts disclosed that the following accounts were not properly accounted: 2017 2018 Rent received in advance 22,500 30,000 Accrued salaries 13,500 18,000 Prepaid interest 33,750 45,000 Commission receivable 15,750 14,625 Depreciation expense 26,250 26,250 Equipment purchased at the beginning of the year charged to expense (10 year life) 75,00010. What is the pre-tax net effect of the above errors on retained earnings on December 31, 2018? A. 3,375 understated B. 3,375 overstated C. 19,125 understated D. 19,125 overstated
Bengston, CPA, is conducting the audit of Pollution ControlDevices, Inc. In addition, a supplemental negative assurance report is required to a majormortgage holder. The supplemental report concerns indenture agreements to keep theclient from defaulting on the mortgage. Total assets are $14 million and the mortgage isfor $4 million. The major provisions of the indentures are as follows:1. The current ratio must be maintained above 2.3 to 1.2. The debt/equity ratio must be maintained below 3.0.3. Net earnings after taxes must exceed dividends paid by at least $1 million.a. Write the appropriate supplemental report if all three indenture agreement provisions have been satisfied.b. How would the supplemental report change if net earnings after taxes were $1,010,000and dividends paid were $60,000?c. Assume the same situation as in part b. and also assume that the client refuses tomodify the financial statements or disclose the violation of the indenture agreementprovisions on the grounds…
The Managing Director of Kotoku Ltd received the financial reports for year ended 31st December 2019 with the 2018 comparatives from his Accountant. He does not understand why the company started the year with a bank balance of GHS6,000,000 but ended the year with a bank balance of only GHS300,000. He feels the Accountant has misappropriated the funds because the company made profits of GHS4,425,000 during the 2019 financial year and so adding that amount to the opening bank balance should result in a closing bank balance of GHS10,425,000. He approached you as a financial analyst to do a thorough analysis of the financial statement. An extract of Profit or loss, statement of financial position and the cashflow prepared from the full financial statements are shown below: Statement of Cashflow for the year ended 31st December 2019 GH¢ GH¢ Cash flows from operating activities Profit before taxation 7,275,000 Adjustment for items not involving a flow of cash: Interest…
Johnny Kang, CPA, is the auditor of the Felix Lee Ltd. Johnny Kang, CPA is considering the audit work to be performed in the accounts payable area for the current year’s engagement. The prior year papers show that confirmation requests were mailed to one hundred of the client’s one thousand suppliers. The selected suppliers were based on Johnny Kang’s sampling, which was designed to select high value items in the accounts payable balance. Johnny Kang and Felix Lee Ltd.’s accountant, DY Anderson spent substantial number of hours resolving relatively minor differences between the confirmation replies and accounting records. Alternative audit procedures were used for those suppliers who did not respond to the confirmation requests. Required:1. Identify the accounts payable assertions that Johnny Kang must consider in determining the substantive tests to be followed. 2. Identify situations for which Johnny Kang should use accounts payable confirmations and discuss whether he is required to…
YOU ARE REQUIRED TO discuss fully whether the below situation would constitute a reportable irregularity in terms of the Auditing Profession Act 2005. You are currently engaged in the audit of Lungile (Pty) Ltd, a company that offers its services to companies that import goods from overseas. Lungile (Pty) Ltd, which is located at the Durban harbour, takes responsibility for clearing the imported goods through the harbour and customs. They also arrange to warehouse of cleared goods awaiting transportation to the purchasers. Lungile (Pty) Ltd have a reputation for "getting things done". Whilst conducting some tests of detail on a sample ofpayments you came across a payment to an entity named Lungile Pty Ltd that was not supported by any documentation at all. A quick search through the payment records revealed a number of these payments, none of which was supported by any documentation. You traced the payments to the company's bank statements and were surprised to find that, on the bank…
Imagine Mr Mohammed Azam is a renowned auditor at Muscat in Sultanate of Oman. He conducts audit of Dry Dock Company S.A.O.C. He has prepared the audit report after completion of audit engagement; now, he is in the process of organizing the audit documentations to provide evidence in respect of audit procedure performed and relevant evidence obtained relating to transactions recorded in the financial statements. The auditor finalized the audit report on 1st June 2020. Based on the above information about audit documentation of Dry Dock Company S.A.O.C you are required to identify the date within which audit documentation must be completed. a. On or before 15th July 2020 O b. None of the options c. On or before 1st July 2020 d. On or before 15th August 2020
You are the auditor in charge of the audit of Irene PLC, which has a 30 June year end. The subsequent events review for the year ended 30 June 2022 revealed that, on 1 August 2022, a receiver was appointed at a major customer. At 30 June 2022 that customer owed GHS 150,000 and goods costing GHS 200,000 made to that customer’s specification were held in inventory. Both these amounts are material.RequiredList the matters to which you would direct your attention in respect of the above in relation to the audit for the year ended 30 June 2022, if the audit report on the financial statements has not yet been written.
The data below is the sales of MGM Co. The accountant of the company hasprovided you with the following data as well as his computed balance ofP2,350,000 as the gross sales of the company. As the external auditor of thefirm, you are tasked to compute whether the gross sales presented to you isunderstated or overstated as compared to your audited amount. How much isthe understatement or overstatement? (Place 0 if there is no misstatement. If theamount represents an overstatement, place a - sign before the amount. No needto provide description.)
Starbucks Corporation Form 10-K, For the Fiscal Year Ended October 1, 2023 Answer the following questions: What is the company's industry? What are Starbuck's primary products? What raw materials does the Starbucks company use? Where is the Starbucks company located? What other people/companies are closely associated with Starbucks company? What information is included in Item 1 and Item 1A of the Starbucks Form 10-K? How might that information be useful to the audit during audit planning?
You are the audit team assign to audit the unaudited set of financial statements for XYZ Company Ltd. for year ended 30 June 2002. Prepare written report to highlight the audit procedures to be used to substantiate/confirm the amounts reported for following items on the financial statements provided: Revenue and accounts receivable Purchases and accounts payable
You are an employee of Dick and Associates’ Auditing Firm. The company take on an engagement to audit Full Bright Company Limited. The engagement was divided into segments such as receivables, payables, cash and bank, inventories and non- current assets and each segment is headed by an audit senior. The audited of the non -current assets was assigned to you. After reviewing the financial statement, you re-cognized that non-current assets values 500 million and current assets values 400 million. A machine values 250 million was acquired by Full Bright Co. Ltd during the period under audit. You also noticed that the Depreciation on some of the assets were not calculated properly. The company did not keep a fixed asset registry. NB. The company has no Goodwill. a) Discuss at least four (4) audit procedures you would perform in completing your audit on the non-current assets. b)…