Tyrone brings up the audit of Sooty Ltd. Sooty manufactures machine parts which are used for servicing heavy equipment in the mining industry throughout Australia. Tyrone informs you that during the planning stage of the audit of Sooty, it was found that one of Sooty’s key suppliers had gone into administration which had led to major shortages of key materials. In order to circumvent this problem, Sooty secured the supply of materials through an alternative supplier, however Tyrone notes that the alternative supplier is new to the market and that some of Sooty’s production staff have been complaining that the materials are of inferior quality. Tyrone says that Sooty has also suffered from cash flow problems recently as one of their debtors, Brown Ltd, has also been experiencing financial problems, taking up to 4 months to pay amounts which are normally due within 30 days. Tyrone notes that Brown makes up 35% of Sooty’s sales and that management wish to maintain a good relationship with Brown. The resulting cash flow implications has meant that Sooty has been drawing on its lines of credit, which has subsequently caused it to temporarily violate the terms of its contract with its bank, ASBC, which requires Sooty to maintain a current ratio of 2:1.
Tyrone has a responsibilty to conduct Audit as per standard of Auditing and To ensure about applicable financial reporting framwork which are applicable to entity.
Prime objective of tyrone is financial statement of sooty co, are free from material misstatement and tyrone is able to get sufficient and appropriate audit evidence.
Auditor reqire to understand the entity and its envronment and risk of material misstatement as per sa315.
Auditor of sooty co. require to obtain evidence regarding test of control and test of details.
Auditor should identify that :
accounts and balance are consistent accorting to accountg policy.
internal control are designed in effective manner.
innternal control are operate effectively.
auditor should obtain appropriate and sufficient audit avidence to draw conclusion.
audit obtain oudit evidence on the samping basis.
if risk of material misstatement are exit in finacial statement of the scooty. auditor are unable to obatain sufficient and approriate audit evidence then auditor wil prove adverse opinion on fs of scooty.
as per sa505 external confirmation is required then auditor should confirm from debtor .
Tyrone brings up the audit of Sooty Ltd. Sooty manufactures machine parts which are used for...
Substantive testing at Sooty Ltd Lastly, Tyrone brings up the audit of Sooty Ltd. Sooty manufactures machine parts which are used for servicing heavy equipment in the mining industry throughout Australia. Tyrone informs you that during the planning stage of the audit of Sooty, it was found that one of Sooty’s key suppliers had gone into administration which had led to major shortages of key materials. In order to circumvent this problem, Sooty secured the supply of materials through an...
Sufficiency and appropriateness of audit evidence at Perkins Ltd. Tyrone has indicated that he has completed testing on accounts payable and sales Perkins Ltd, a small manufacturer of confectionary goods. Tyrone has performed the following tests: • In relation to accounts payable, Tyrone selected a random sample of creditors from the accounts payable ledger and agreed these to statements, invoices and reconciliations. The balance of the accounts payable ledger was then agreed to the general ledger and the trial balance....
Question 2 You are the auditor of Green Machine Ltd, a manufacturer. You have obtained a summary of the property, plant and equipment for the year ended 30 June 2018, which identifies cost and accumulated depreciation brought forward, additions and disposals in the year and depreciation charges. A review of the management letter from the previous year’s audit shows that there were some problems in relation to making a distinction between capital and revenue expenditure; some items were capitalized when...
Question 2 You are the auditor of Green Machine Ltd, a manufacturer. You have obtained a summary of the property, plant and equipment for the year ended 30 June 2018, which identifies cost and accumulated depreciation brought forward, additions and disposals in the year and depreciation charges. A review of the management letter from the previous year’s audit shows that there were some problems in relation to making a distinction between capital and revenue expenditure; some items were capitalized when...
Question 2 You are the auditor of Green Machine Ltd, a manufacturer. You have obtained a summary of the property, plant and equipment for the year ended 30 June 2018, which identifies cost and accumulated depreciation brought forward, additions and disposals in the year and depreciation charges. A review of the management letter from the previous year’s audit shows that there were some problems in relation to making a distinction between capital and revenue expenditure; some items were capitalized when...
Evaluation and testing of controls at Hales Ltd Tyrone has provided a narrative of controls over inventory at Hales Ltd and would like you to provide some advice on making the preliminary control risk assessment. Hales is a distributor of haircare products, including shampoos, conditioners and styling products throughout Australia. Hales uses an on-line ordering system. Hales does not manufacture any goods in house, instead, an inventory of raw materials is kept, with manufacturing being outsourced to other companies. Hales...
Evaluation and testing of controls at Hales Ltd Tyrone has provided a narrative of controls over inventory at Hales Ltd and would like you to provide some advice on making the preliminary control risk assessment. Hales is a distributor of haircare products, including shampoos, conditioners and styling products throughout Australia. Hales uses an on-line ordering system. Hales does not manufacture any goods in house, instead, an inventory of raw materials is kept, with manufacturing being outsourced to other companies. Hales...
You are an Audit Senior currently planning the 30 June 20X8 audit of Steel Limited, an Australian-owned company that produces and exports steel to India. At a recent planning meeting with Steel Limited’s senior staff, you obtained the following overview of this year’s operations: Tight checks by Australian custom officials to halt the smuggling of scrap steel have delayed several shipments of steel. These delays have angered Indian customers who are threatening to deduct 20% from the amounts owing as...
You are an audit supervisor of Pure & Co and are planning the audit of your client, Star Co. Ltd which manufactures cleaning products. Its year end was 31 July 20X6 and the draft profit before tax is $33·6 million. You are supervising a large audit team for the first time and will have specific responsibility for supervising and reviewing the work of the audit assistants in your team. Pure Co purchases most of its raw materials from suppliers in...
Workshop Auditing exercise. KMP security Ltd has been an audit client of Maitland Partners for the past 15 years. KMP Security Ltd, an ASX listed company, is based in Roma where it manufactures high-tech security systems. KMP Security’s end of financial year is 30 June, and Maitland Partners is preparing to commence the 2019 audit. Caryn Marks has been the engagement partner on the KMP Security Ltd’s audit for the past five years. Caryn is a specialist in the security/IT...