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your assistant, Samson Chow, on the audit Bexca Ltd for the year ended 30 June 201 following and have noted the tv independent matters: (i) securities, In testing investments in liste Samson selected shareholdings with a market valı above $200,000 and checked them the closing market value reported the Australian Stock Exchange determine the net realisable value each shareholding. The items teste totalled $5,500,000, or 60% of the tot balance. Of the items tested, only or error of $110,000 was discovere Samson concluded that the error w not itself material, as only 2% of tl

your assistant, Samson Chow, on the audit Bexca Ltd for the year ended 30 June 201 following and have noted the tv independent matters: (i) securities, In testing investments in liste Samson selected shareholdings with a market valı above $200,000 and checked them the closing market value reported the Australian Stock Exchange determine the net realisable value each shareholding. The items teste totalled $5,500,000, or 60% of the tot balance. Of the items tested, only or error of $110,000 was discovere Samson concluded that the error w not itself material, as only 2% of tl

FINANCIAL ACCOUNTING
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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Question 3 6:15 A M M {l 59%i You have reviewed the work performed by your assistant, Samson Chow, on the audit of Bexca Ltd for the year ended 30 June 2018 and have noted the following two independent matters: (i) In testing investments in listed securities, Samson selected all shareholdings with a market value above $200,000 and checked them to the closing market value reported by Stock Exchange to the Australian determine the net realisable value of each shareholding. The items tested totalled $5,500,000, or 60% of the total balance. Of the items tested, only one error of $110,000 was discovered. Samson concluded that the error was not itself material, as only 2% of the balance was tested. He extrapolated this error to the total population and estimated that the error for the total population would be $185,000, which was also immaterial. Therefore, he concluded that the investments in listed securities were fairly stated at the lower of cost or net realisable value. (ii) Bexca Ltd has 1,000 stock lines that perpetual inventory system. Stock is counted on a cyclical basis so that all lines are covered at least once per year. Samson are maintained on a attended the March stocktake to observe the counting procedures and
Transcribed Image Text:Question 3 6:15 A M M {l 59%i You have reviewed the work performed by your assistant, Samson Chow, on the audit of Bexca Ltd for the year ended 30 June 2018 and have noted the following two independent matters: (i) In testing investments in listed securities, Samson selected all shareholdings with a market value above $200,000 and checked them to the closing market value reported by Stock Exchange to the Australian determine the net realisable value of each shareholding. The items tested totalled $5,500,000, or 60% of the total balance. Of the items tested, only one error of $110,000 was discovered. Samson concluded that the error was not itself material, as only 2% of the balance was tested. He extrapolated this error to the total population and estimated that the error for the total population would be $185,000, which was also immaterial. Therefore, he concluded that the investments in listed securities were fairly stated at the lower of cost or net realisable value. (ii) Bexca Ltd has 1,000 stock lines that perpetual inventory system. Stock is counted on a cyclical basis so that all lines are covered at least once per year. Samson are maintained on a attended the March stocktake to observe the counting procedures and
cyclical basis so that all lines are covered at least once per year. Samson attended the March stocktake to observe the counting procedures and conducted 20 test counts from the floor to the client's count sheets and 20 from the client's count sheets to the floor. He uncovered two minor discrepancies of one item each, which he considered to be immaterial. The client also uncovered five minor discrepancies between the perpetual records and the actual quantity on hand. None of these discrepancies was adjusted on the perpetual records, as the amounts involved only totalled $50,000 and were considered to be immaterial. Samson concluded that no further work was considered necessary on stock quantities at year-end. Required: (a) sufficient appropriate audit evidence. Explain what is meant by (b) Explain whether sufficient appropriate audit evidence has been obtained for each of the above situations. Give reasons for your answer.
Transcribed Image Text:cyclical basis so that all lines are covered at least once per year. Samson attended the March stocktake to observe the counting procedures and conducted 20 test counts from the floor to the client's count sheets and 20 from the client's count sheets to the floor. He uncovered two minor discrepancies of one item each, which he considered to be immaterial. The client also uncovered five minor discrepancies between the perpetual records and the actual quantity on hand. None of these discrepancies was adjusted on the perpetual records, as the amounts involved only totalled $50,000 and were considered to be immaterial. Samson concluded that no further work was considered necessary on stock quantities at year-end. Required: (a) sufficient appropriate audit evidence. Explain what is meant by (b) Explain whether sufficient appropriate audit evidence has been obtained for each of the above situations. Give reasons for your answer.
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