By how much would the December 31, 2021 retained earnings be misstated if no adjustments were made for the above errors? B. Compute for the adjusted net income for the year 2021.
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A. By how much would the December 31, 2021
B. Compute for the adjusted net income for the year 2021.
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- It is February 16, 2020, and you are auditing Davenport Corporation's financial statements for 2019 (which will be issued in March 2020). You read in the newspaper that Travis Corporation, a major customer of Davenport, is in financial difficulty. Included in Davenports accounts receivable is 50,000 (a material amount) owed to it by Travis. You approach Jim Davenport, president, with this information and suggest that a reduction of accounts receivable and recognition of a loss for 2019 might be appropriate. Jim replies, Why should we make an adjustment? Ted Travis, the president of Travis Corporation, is a friend of mine; he will find a way to pay us, one way or another. Furthermore, this occurred in 2020, so lets wait and see what happens; we can always make an adjustment later this year. Our 2019 income and year-end working capital are not that high; our creditors and shareholders wouldnt stand for lower amounts than they already are. Required: From financial reporting and ethical perspectives, prepare a response to Jim Davenport regarding this issue.You were first appointed auditor of the RST Corporation in 2020. You completed the audit for 2020 and prepared audited financial statements directly from the audit working papers. You have returned to make the 2021 audit and discovered that the client's bookkeeper failed to record the adjusting entries you made in 2020 audit working papers, which entailed adjustments for the following items The December 31, 2020 inventory was understated by P5,000. No entry was made for accrued utilities expense of P2,500 as of year-end. Ordinary motor repairs of P3,200 were charged to Accumulated Depreciation during 2020. The company failed to record the provision for uncollectible accounts in the amount of P6,000. Your examination of the 2021 entries in the accounts uncovered the following: An expenditure of P10,000 for repairs of office equipment had been charged to furniture and Equipment. The company records depreciation at 10% of the December 31 balance of the Property and Equipment accounts.…You are the auditor in charge of the audit of Irene PLC, which has a 30 June year end. The subsequent events review for the year ended 30 June 2022 revealed that, on 1 August 2022, a receiver was appointed at a major customer. At 30 June 2022 that customer owed GHS 150,000 and goods costing GHS 200,000 made to that customer’s specification were held in inventory. Both these amounts are material.RequiredList the matters to which you would direct your attention in respect of the above in relation to the audit for the year ended 30 June 2022, if the audit report on the financial statements has not yet been written.
- On February 17, 2024, a CPA completed all the evidence gathering procedures on the audit of the financial statements for the Buckheizer Technology Corporation for the year ended December 31, 2023. The audit is satisfactory in all respects except for the existence of a change in accounting principles from FIFO to LIFO inventory valuation, which results in an explanatory paragraph on consistency. On February 26, the auditor completed the tax return and the draft of the audit report. The final audit report was com-pleted, attached to the financial statements, and delivered to the client on March 7. What is the appropriate date on the auditor's report?For the following independent events, assume that each has a material effect on the financial statements. The financial year of your audit client BLQ Ltd ended on 31 December 2018. Your audit report was signed on 20 February 2019 and the financial statements were issued on 4 March 2019. Listed below are events that have taken place. (a) On 14 February 2019: You discovered that 30% of BLQ Ltd’s inventory is destroyed by a fire on 7 January 2019. (b) On 10 March 2019, you discovered that BLQ Ltd had settled a class action lawsuit for $2 million on 30 January 2019. The class action was initiated by discontent customers in December 2017 for faulty products. The legal cost was disclosed as a provision worth $500,000 on the balance sheet. Required: For each of the events above, explain 1) the auditor’s responsibilities, 2) the appropriate accounting treatments and 3) the impact on audit report.You are the audit partner at Smart Auditors Inc. For the month of April 2020, you have received the following technical queries relating to different audit clients. Please note that the matters below are not related. Matter 1: In terms of the basic evidence gathered on the audit of We Fix (Pty ) Ltd, the auditor noted that inventory with a cost of N$500 000 and a net realisable value of N$750 000 has been recorded at the net realisable value amount. The issue has been discussed with management and they have refused to correct the misstatement. Matter 2: On the audit of Grey Fade (Pty) Ltd, based on the audit evidence obtained, the auditor concluded that there are material uncertainty relating to events and conditions which cast significant doubt on the company’s ability to continue as a going concern. However, the audit committee and management had come to the same conclusion and adequate disclosure in the financial statements relating to the material uncertainty had been made. The…
- Ambrose is auditing the financial statements of Mays (dated December 31, 2017). The date of the auditor’s report is February 17, 2018, and the audit report release date is February 20, 2018. For which of the following matters would Ambrose have the least responsibility?a. The obsolescence of inventory held on December 31, 2017, that was identified on January 20, 2018.b. A customer’s deteriorating financial condition that was identified on February 19, 2018.c. A merger that was announced by Mays and known by Ambrose on February 12, 2018.d. A major loss due to a catastrophe that occurred and was known by Ambrose on March 1, 2018.The board of directors of Danson Company limited asked Jameel & Soften, a Private Auditing Firm to audit Danson’s financial statements for the year ended 31st December 2019. Jameel & Soften explained the need to make an enquiry of the predecessor auditor and requested permission to do so. Danson’s board of directors refused to honor the request on the grounds that relations with the predecessor had deteriorated so significantly that Jameel & Soften would receive biased and defamatory information from the predecessor.Requireda. What is the purpose of the communication between the successor and the predecessor auditor?b. How does communication aid in assessing audit risk?c. What position should Jameel & Soften assume in the present situation? How should they respond to Danson’s refusal to permit communication with the predecessor auditor?The board of directors of Danson Company limited asked Jameel & Soften, a Private Auditing Firm to audit Danson’s financial statements for the year ended 31st December 2019. Jameel & Soften explained the need to make an enquiry of the predecessor auditor and requested permission to do so. Danson’s board of directors refused to honor the request on the grounds that relations with the predecessor had deteriorated so significantly that Jameel & Soften would receive biased and defamatory information from the predecessor. Required What is the purpose of the communication between the successor and the predecessor auditor? How does communication aid in assessing audit risk? What position should Jameel & Soften assume in the present situation? How should they respond to Danson’s refusal to permit communication with the predecessor auditor?
- On April 1, 2020, you were hired by Binus Inc., a closely held company, as a staff member of its newly created internal auditing department. While reviewing the company’s records for 2018 and 2019, you discover that no adjustments have yet been made for the items listed below: Required:Explain the problems for each items and prepare journal entries showing the adjustments that are required!The board of directors of Danson Company limited asked Jameel & Soften, a Private AuditingFirm to audit Danson’s financial statements for the year ended 31st December 2019. Jameel &Soften explained the need to make an enquiry of the predecessor auditor and requestedpermission to do so. Danson’s board of directors refused to honor the request on the grounds thatrelations with the predecessor had deteriorated so significantly that Jameel & Soften wouldreceive biased and defamatory information from the predecessor. a. What is the purpose of the communication between the successor and the predecessorauditor?b. How does communication aid in assessing audit risk?c. What position should Jameel & Soften assume in the present situation? How should theyrespond to Danson’s refusal to permit communication with the predecessor auditor?Ann Johnson has audited the financial report of Quick Ltd for the year ended 30 June 2020. Although Ann’s audit fieldwork was completed on 14 August 2020, her auditor’s report was signed on 20 August 2020 and sent to management that day. The management of Quick Ltd advised Ann that their annual report, which will be mailed to shareholders on 10 October 2020, will also include an unaudited financial report for the first quarter ended 30 September 2020. Under the circumstances, Ann is responsible for undertaking subsequent events audit procedures through to:Select one:a. 10 October 2020b. 20 August 2020c. 14 August 2020d. 30 September 2020