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 takeover offer for Gerald Ltd which is likely to increase sales by forty percent. d) On 12th September 2021 the company suffered major water damage in one of its stores requiring more than $1,000,000 in repairs which was material .The amount was uninsured. e)On 20th September 2021 a major customer went into bankruptcy owing $410,000 .At balance date the account had appeared to be collectible . Required: (a)For each of the above events or transactions, discuss audit procedures that should have been undertaken by the auditor . (b)Indicate the nature of the adjusting entries or disclosure required by the company in each situation.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 takeover offer for Gerald Ltd which is likely to increase sales by forty percent. d) On 12th September 2021 the company suffered major water damage in one of its stores requiring more than $1,000,000 in repairs which was material .The amount was uninsured. e)On 20th September 2021 a major customer went into bankruptcy owing $410,000 .At balance date the account had appeared to be collectible . Required: (a)For each of the above events or transactions, discuss audit procedures that should have been undertaken by the auditor . (b)Indicate the nature of the adjusting entries or disclosure required by the company in each situation.

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