The financial statements of company are closed on 31st December, 2020. The auditor completed documentation of final audit file before 15th January, 2021 in electronic form. He submitted the audit report on 31st January, 2021. Immediately after submission of audit report he deleted the audit file from his computer system. Is the deletion of final audit file valid? a. It is up to the discretion of auditor b. None of the options c. No, it is not valid as per the requirement of ISA d. Yes, it is valid as per the requirement of ISA

The financial statements of company are closed on 31st December, 2020. The auditor completed documentation of final audit file before 15th January, 2021 in electronic form. He submitted the audit report on 31st January, 2021. Immediately after submission of audit report he deleted the audit file from his computer system. Is the deletion of final audit file valid? a. It is up to the discretion of auditor b. None of the options c. No, it is not valid as per the requirement of ISA d. Yes, it is valid as per the requirement of ISA

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter14: Activities Required In Completing A Quality Audit

Section: Chapter Questions

Problem 86RSCQ

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14-The financial statements of a company are closed on 31st December, 2020 and auditor has completed documentation before 30th January, 2021. Is it a timely documentation? a. No, it is not timely documentation as per the requirement of ISA b. None of the options c. Time does not matter in the preparation of audit documentation d. Yes, it is timely documentation as per the requirement of ISA
9. The 2021 financial statement audit of OMG company began when the trial balance was received from management. You were assigned to audit the accounts payable of the entity. The schedule of liabilities to vendor showed that the company has only five suppliers which account for 90% of the total accounts payable balance. Thus, the audit team has decided to send confirmation letters to those vendors. Upon your further review, you have noted that the amounts provided in the schedule and the trial balance does not balance, but you have noted that the difference is below the materiality threshold. Considering the facts provided, which of the following statements is true? Group of answer choices a. Negative confirmation letters may be sent to the suppliers even if we did not rely on controls. b. Since the difference is below materiality, there is no need to change samples. c. The sampling technique used by the audit associate is invalid because it involves bias. d. There is a sampling…
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.…
Sunny Best is the engagement partner for the financial report audit of BigMac Ltd for the year ended 31 December, 2021. The following material events or transactions have come to Sunny Best’s attention before he is scheduled to issue his report on 28 February, On 1 February, 2022, a plant owned by BigMac Ltd was damaged by a flood, resulting in an uninsured loss of inventory. For each of the above events or transactions, discuss audit procedures that should have brought the item to the auditor’s attention, and indicate the treatment required in the financial report. Give reasons for your decision.
In October 2020, the head office of Joey Limited was damaged by a fire. A lot of the company's accounting records were destroyed before the audit for the year ended 31 December 2020 took place, as Joey Limited has no practice of using electronic accounting records. The company's financial accountant has prepared financial statements for the year ended 31 December 2020 on the basis of estimates and the information he has been able to salvage. You have completed the audit of these financial statements. a) Explain how your audit report would be affected by the fire at the head office of Joey Limited and the possible audit opinions in this situation. b) Compare the responsibilities of directors and auditors regarding the published financial statement of Joey Limited.
In October 2020, the head office of Joey Limited was damaged by a fire. A lot of the company's accounting records were destroyed before the audit for the year ended 31 December 2020 took place, as Joey Limited has no practice of using electronic accounting records. The company's financial accountant has prepared financial statements for the year ended 31 December 2020 on the basis of estimates and the information he has been able to salvage. You have completed the audit of these financial statements. a) Explain how your audit report would be affected by the fire at the head office of Joey Limited and the possible audit opinions in this situation.Require:b) Compare the responsibilities of directors and auditors regarding the published financial statement of Joey Limited.
The fieldwork for the December 31, 2018 audit of Schmidt Corporation ended on March 17, 2019. The financialstatements and auditor's report were issued on March 29, 2019. In each of the material situations (1 through 5)below, indicate the appropriate action (a, b, c). The possible actions are as followsa. Adjust the December 31, 2018 financial statements.b. Disclose the information in a footnote in the December 31, 2018 financial statements.c. No action is required.The situations are as follows:________ 1. On March 1, 2019, one of Schmidt Corporation's major customers declared bankruptcy. The customer'sfinancial condition in 2018 was deteriorating and they owed Schmidt Corporation a large sum of money as of thebalance sheet date.________ 2. On February 17, 2019, Schmidt Corporation sold some machinery for its book value.________ 3. On February 20, 2019 a flood destroyed the entire uninsured inventory in one of Schmidt'swarehouses.________ 4. On January 5, 2019, there was a significant…
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.
42-Mr. X is an auditor of XYZ Company. During the course of audit, he found that Mr. Y who was one of the executive directors of the company raised OMR 15,000 from the debenture holder which was beyond his authority. On confirming, he replied by e-mail that it was later approved by board. Can the e-mail received from executive director be considered as valid audit document? O a. Unable to decide as the information is not sufficient O b. No, it cannot be considered as valid audit document O c. Only the evidence received in hard form is valid o d. Yes, it can be considered as valid audit document
While completing your audit work for the 30 June 2022 audit of Bexca Ltd, you become aware of the following material matters: (i) On 5 July, Blue Pty Ltd, a major customer of Bexca Ltd, was placed into liquidation. As Blue Pty Ltd had confirmed the balance due to Bexca Ltd as at balance date, management of Bexca Ltd has refused to write off or provide for the Blue Pty Ltd account in the 30 June 2022 financial report. However, they are prepared to disclose this information as a note to the financial report. (ii) One of Bexca’ major customers, Leisure Pty Ltd, suffered a fire on 20 July. Since Leisure Pty Ltd was uninsured, it is unlikely that their accounts receivable balance will be paid. (iii) On 25 July, a well-known financial planner advised his clients not to invest in Bexca due to poor long-term growth prospects. The market price for Bexca’s shares subsequently declined by 40%. (iv) A note to the financial report of Bexca Ltd refers to an agreement to sell its major subsidiary,…
You were assigned to audit the financial statements of Swansea Corporation as at and for the year ended December 31, 2021. Your senior asked you to draft a memo on materiality and tolerable error for your client. Swansea Corporation has incurred substantial net losses due to COVID-19 pandemic. Up to 2019, it has been profitable. Which of the following is least likely to be your starting point in computing materiality? Group of answer choices Normalized net income Net loss Total assets Normalized revenue
The 2021 financial statement audit of OMG company began when the trial balance was received from management. You were assigned to audit the accounts payable of the entity. The schedule of liabilities to vendor showed that the company has only five suppliers which account for 90% of the total accounts payable balance. Thus, the audit team has decided to send confirmation letters to those vendors. Upon your further review, you have noted that the amounts provided in the schedule and the trial balance does not balance, but you have noted that the difference is below the materiality threshold. Considering the facts provided, which of the following statements is true? Group of answer choices A. Since the difference is below materiality, there is no need to change samples. B. The sampling technique used by the audit associate is invalid because it involves bias. C. There is a sampling risk associated with the audit sampling procedure performed by the audit associate D. Negative…