Essay on The Auditing Case Study

767 WordsApr 12, 20094 Pages
Memo To : Watson & Partners Re : Audit of Moss Green Ltd. Company structure Moss Green Ltd. is a wine grower and producer of medium to high quality wines, located in Western Australia’s Margaret River region. Tickit Associates was Moss Green’s previous auditing company and we were engaged immediately after it listed on the Australian Stock Exchange to take over as auditors. The company is successful in exporting internationally, especially in the United Kingdom supermarket chain, Safebury. Mr.Tom Green is the founder and Managing Director of Moss Green Ltd. and Ms.Wendy Chong is the company’s financial director. There are two concerns involving Mr.Green’s lack of interest in financial matters and Ms.Chong’s financial…show more content…
Thus, he relies completely on Ms.Chong’s performances. Mr.Green is satisfied with Ms.Chong’s performance in relation to the currency hedging contract she has entered. Consequently, the company seems to be protected against the risks of an uncertain exchange rate. The hedging contract is between the Australian dollar and the British Pound. In this circumstance however, we need to examine whether Ms.Chong might be using currency hedging more than is needed to protect the company from foreign exchange risk. It could be that Ms.Chong is trading in currency contracts and that the high profits do not reflect the company’s true performance. Lack of internal control is a significant problem which we have to examine especially in relation to whether Ms.Chong has opportunities for fraudulent activities. Stock & Sales We are aware that the company has wine from 2004 stored in the Margaret River warehouse and in London, after discussion with the production manager. This happened because Safeburys rejected the wine and payment for this stock is a matter of disagreement. The way the payment is recorded in the company’s financial statement needs to be investigated. We have to be sure that the uncertain payment is properly recorded. Because Safeburys is one of Moss Green Ltd. largest customers, the size of the disputed
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