Chapter 20, Problem 20.2DMP

You are the audit manager of Matfine & Co and are reviewing the key issues identified in the files of two audit clients as follows: Pito Industries Co (Pito) Pito’s year-end was 31 March 2019 and the draft financial statements show revenue of $32·2 million, receivables of $6·1 million and profit before tax of $3.4 million. The fieldwork stage for this audit has been completed. A customer of Pito owed an amount of $375,000 at the year-end. Testing of receivables in April highlighted that no amounts had been paid to Pito from this customer as they were disputing the quality of certain goods received from Pito. The finance director is confident the issue will be resolved and no allowance for receivables was made with regards to this balance. Albo Trading Co (Albo) Albo is a new client of Matfine & Co, its year-end was 31 January 2019 and the firm was only appointed auditors in February 2019, as the previous auditors were suddenly unable to undertake the audit. The fieldwork…

You are the Audit Manager in charge of an audit of Bahwan Automobile, a limited liability company. The company's year-end is 31 December, and Bahwan Automobile LLC is being a client for first time. Which of the following matters will you determine in establishing overall audit strategy? O a. The extent of review of another accountant's work O b. The timing in which the employees are to be performed their tasks O The number of resources to allocate to specific entity's department O d. The resources to deploy for specific audit areas

You are the audit manager of Matfine & Co and are reviewing the key issues identified in the files of two audit clients as follows: 1) Pito Industries Co (Pito) Pito’s year-end was 31 March 2019 and the draft financial statements show revenue of $32·2 million, receivables of $6·1 million and profit before tax of $3.4 million. The fieldwork stage for this audit has been completed. A customer of Pito owed an amount of $375,000 at the year-end. Testing of receivables in April highlighted that no amounts had been paid to Pito from this customer as they were disputing the quality of certain goods received from Pito. The finance director is confident the issue will be resolved and no allowance for receivables was made with regards to this balance.  2) Albo Trading Co (Albo) Albo is a new client of Matfine & Co, its year-end was 31 January 2019 and the firm was only appointed auditors in February 2019, as the previous auditors were suddenly unable to undertake the audit. The fieldwork…

The annual examination of Felton Company’s financial statements by its external public accounting firm (auditors) is nearing completion. The following conversation took place between the controller of Felton Company (Francie) and the audit manager from the public accounting firm (Sumana):Sumana: You know, Francie, we are about to wrap up our audit for this fiscal year. Yet, there is one item still to be resolved.Francie: What’s that?Sumana: Well, as you know, at the beginning of the year, Felton began a defined benefit pension plan. This plan promises your employees an annual payment when they retire, using a formula based on their salaries at retirement and their years of service. I believe that a pension expense should be recognized this year, equal to the amount of pension earned by your employees.Francie: Wait a minute. I think you have it all wrong. The company doesn’t have a pension expense until it actually pays the pension in cash when the employee retires. After all, some of…

AJ Kumar is completing the December 31, 2020, audit of Kiwi Company. As part of the final procedures, Kumar has requested representations from Kiwi’s management regarding their assertion as to the fairness of the financial statements and other important matters addressed by professional standards. Because Kiwi’s management is attending an analyst briefing in the upcoming week, Kumar receives these signed representations dated February 6, 2021. Kumar has a few remaining items to complete, does so, and dates the auditor’s report February 9, 2021. Describe the most appropriate course of action that the auditors should take.

You are an audit manager with UP-Wise & Associate; Chartered Accountants and Business Consultants. You have been assigned to the audit of Eastern Decors Ltd (ED), a long-established firm of event planning service in the city where your practice is located. The audit of the financial statements for the year ended 31st March, 2019 is due to commence shortly. The audit firm is aware that the client has received a loan from the bank in April, 2018 and that the bank will rely on the audited financial statements as part of the terms and conditions in the loan agreement. The partner in charge of UP-Wise & Associate has just visited the client and made the following notes during his trip: (i)  The firm has a number of individual and corporate clients outside Accra and has invested heavily in recording and broadcasting equipment to allow some events to be broadcasted over the internet. This facility is now available at all events conducted in ED’s premises and is proving to be very…

You are the audit senior responsible for the audit of Sampson Limited. You are currently planning theaudit for the year ended 31 December 20X7. During your initial planning meeting held with thefinancial controller, he told you of the following changes in the company’s operations.(i) Due to the financial controller’s workload, the company has employed a treasurer. The financialcontroller is excited about the appointment because in the two months that the treasurer hasbeen with the company he has realised a small profit for the company through foreign-exchangetransactions in yen.(ii) Sampson has planned to close an inefficient factory in country New South Wales before the endof 20X7. It is expected that the redeployment and disposal of the factory’s assets will not becompleted until the end of the following year. However, the financial controller is confident thathe will be able to determine reasonably accurate closure provisions.(iii) To help achieve the budgeted sales for the year,…

You are the audit senior responsible for the audit of Sampson Limited. You are currently planning theaudit for the year ended 31 December 20X7. During your initial planning meeting held with thefinancial controller, he told you of the following changes in the company’s operations.(i) Due to the financial controller’s workload, the company has employed a treasurer. The financialcontroller is excited about the appointment because in the two months that the treasurer hasbeen with the company he has realised a small profit for the company through foreign-exchangetransactions in yen.(ii) Sampson has planned to close an inefficient factory in country New South Wales before the endof 20X7. It is expected that the redeployment and disposal of the factory’s assets will not becompleted until the end of the following year. However, the financial controller is confident thathe will be able to determine reasonably accurate closure provisions.(iii) To help achieve the budgeted sales for the year,…

You are the audit senior responsible for the audit of Sampson Limited. You are currently planning theaudit for the year ended 31 December 20X7. During your initial planning meeting held with thefinancial controller, he told you of the following changes in the company’s operations.(i) Due to the financial controller’s workload, the company has employed a treasurer. The financialcontroller is excited about the appointment because in the two months that the treasurer hasbeen with the company he has realised a small profit for the company through foreign-exchangetransactions in yen.(ii) Sampson has planned to close an inefficient factory in country New South Wales before the endof 20X7. It is expected that the redeployment and disposal of the factory’s assets will not becompleted until the end of the following year. However, the financial controller is confidentthat he will be able to determine reasonably accurate closure provisions.(iii) To help achieve the budgeted sales for the year,…