Page 428 - F1 Integrated Workbook STUDENT 2018

Chaptter 25

Chaapter 66

Exxampple 1

(a) An entityy Aragon mmade a verry poor atteempt to coonduct its innventory
count. YYou attendeed howeveer there waas insufficieent evidencce that thee
inventorry valuationn at $4 milllion is accuurate. Salees revenuee was $50
million aand profit foor the yearr was $15 million.

(b) An entityy Boleyn did not provvide for a bbad debt off $50,000 ddespite thee
fact thatt the custommer went bbankrupt juust after the year endd. Profit forr the
year was $500,0000 and tradee receivabbles $200,0000.

(c) An entityy Seymourr is being ssued by a ccompetitorr entity for tthe theft off
intellectuual propertty for $5000,000. The lawyers beelieve that t the case
could goo either waay. Howeveer, this is nnot mentionned anywhhere in the
financiall statements.
(d) An entityy Howard iis a cash reretailer. There is no ssystem to cconfirm thee
accuracy of cash ssales.

(e) An entityy Cleves has neglectted to incluude a stateement of prrofit or losss in
its financcial statemments.

(f) An entityy Parr is unndergoing a major coourt case that would bankrupt tthe
entity if lost. The ddirectors asssess and disclose thhe case ass a contingent
liability in the accoounts. The auditors agree with tthe treatmeent and
disclosuure.

Reqquired:
Forr each of tthe above situationss state whhat type off audit repport shoulld
be issued annd explain your chooice.

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