Question 1
You have reviewed the work performed by your assistant, Raymond Snow, on the audit of Tin Ltd for the year ended 30 June 20X8 and you have noted the following two independent matters:
(i) In testing investments in listed securities, Raymond selected all shareholdings with a market value above $200,000 and checked them to the closing market value reported by the Australian Stock Exchange (ASX) to determine the net realisable value of each shareholding.
The items tested totaled $5,500,000 or 60% of the total balance. Of the items tested, only one error of $110,000 was discovered. Raymond concluded that the error was not itself material, as it was only 2% of the balance 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) Tin Ltd has 1,000 stock lines that are maintained on a perpetual inventory system. Stock is counted on a cyclical basis so that all lines are covered at least once per year. Raymond 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 were adjusted on the perpetual records, as the amounts involved only totaled $50,000 and were considered to be immaterial. Raymond concluded that no further work was considered necessary on stock quantities at year end.
Required:
(a) In your own words, explain what is meant by sufficient appropriate audit evidence.
(b) Explain whether sufficient appropriate audit evidence has been obtained for each of the above situations. Give reasons for your answer
Question 2
The following financial ratios have been calculated for Nova Ltd for the year ended 30 June 2008:
Ratio Actual
results
Budgeted
results
Previous
year
Industry Average
Current ratio 1.97 1.92 1.87 1.92
Quick asset ratio 1.06 1.06 1.06 1.11
Inventory turnover 4.21 4.91 4.86 4.76
Net profit ratio 0.05 0.03 0.03 0.03
Gross margin 0.65 0.59 0.61 0.61
Required:
Provide four (4) possible explanations for the results of the various ratios for Nova Ltd and explain their implications for the audit.
Question 3
Required:
Describe five (5) internal control weaknesses in Everyday Supplies’ internal control for the cash receipts and billing functions (5 marks) and explain why they are weaknesses for two (2) that you have identified.
Question 4
Required:
Based on the results of the testing of controls outlined above, determine whether John has arrived at the appropriate conclusion? Justify your answer by addressing the following areas: the risks associated with related party transactions, and the reliability of controls at Taxon Ltd.
The post Tin Ltd appeared first on Homework Aider.
What Students Are Saying About Us
.......... Customer ID: 12*** | Rating: ⭐⭐⭐⭐⭐"Honestly, I was afraid to send my paper to you, but you proved you are a trustworthy service. My essay was done in less than a day, and I received a brilliant piece. I didn’t even believe it was my essay at first 🙂 Great job, thank you!"
.......... Customer ID: 11***| Rating: ⭐⭐⭐⭐⭐
"This company is the best there is. They saved me so many times, I cannot even keep count. Now I recommend it to all my friends, and none of them have complained about it. The writers here are excellent."
"Order a custom Paper on Similar Assignment at essayfount.com! No Plagiarism! Enjoy 20% Discount!"
