ACCO Ltd is a large producer of organic medicinal products. The audit report for the year ended 30 June 20X8 was signed on 6 August 20X8 and along with the financial report was mailed to shareholders on 11 August 20X8.Consider the following independent events. Assume that each event is material.On 5 July, ACCO Ltd entered into a new contract to supply organic facial and skin treatment products to MYA, a new major department store. The contract was similar in nature to other contracts previously negotiated. ACCO Ltd has invested significant funds in developing a new range of organically sourced skin cancer treatment ointments. On 8 July, ACCO Ltd applied for a patent for the ointment, only to discover that a competitor had lodged a similar application on 20 June. The granting of ACCO Ltd’s application is now in serious doubt. Internal audit has uncovered a major fraud at one of ACCO Ltd’s branches. The fraud was perpetrated by two senior staff, acting in collusion over a number of years. The internal auditors released their report to management on 15 July, after a highly confidential investigation spanning several months. One of ACCO Ltd’s major customers, Cheap Vitamins Pty Ltd, suffered a fire on 20 July. Since Cheap Vitamins Pty Ltd was uninsured, it is unlikely that their accounts receivable balance will be paid. Required:For each of the above events, state the appropriate action (if any) that the auditor would require. Give reasons.

Since multiple sub-parts are posted, first three sub-parts shall be answered. All these cases are…

Answered: ACCO Ltd is a large producer of organic…

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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ACCO Ltd is a large producer of organic medicinal products. The audit report for the year ended 30 June 20X8 was signed on 6 August 20X8 and along with the financial report was mailed to shareholders on 11 August 20X8.

Consider the following independent events. Assume that each event is material.

On 5 July, ACCO Ltd entered into a new contract to supply organic facial and skin treatment products to MYA, a new major department store. The contract was similar in nature to other contracts previously negotiated.
ACCO Ltd has invested significant funds in developing a new range of organically sourced skin cancer treatment ointments. On 8 July, ACCO Ltd applied for a patent for the ointment, only to discover that a competitor had lodged a similar application on 20 June. The granting of ACCO Ltd’s application is now in serious doubt.
Internal audit has uncovered a major fraud at one of ACCO Ltd’s branches. The fraud was perpetrated by two senior staff, acting in collusion over a number of years. The internal auditors released their report to management on 15 July, after a highly confidential investigation spanning several months.
One of ACCO Ltd’s major customers, Cheap Vitamins Pty Ltd, suffered a fire on 20 July. Since Cheap Vitamins Pty Ltd was uninsured, it is unlikely that their accounts receivable balance will be paid.

Required:

For each of the above events, state the appropriate action (if any) that the auditor would require. Give reasons.

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