Reference no: EM132743655
Question: Smith, a young CPA and one of the audit team members for Darwin Electrical Appliances Ltd (Darwin), has developed very good insights into the company's systems in the last 12 months and was asked by his partner, Chris, to draft a report on the reliability of the internal control at Darwin for review. The report is to be used as a part of a due diligence assurance engagement for Darwin's prospectus. Darwin wants to be listed on the Australian Securities Exchange by next June.
In carrying out the review, Smith finds a number of matters that concern him. He notices that the controls over inventory requisitions are very poor, leading to numerous complaints from customers about delays and wrong deliveries, and cancellations. Moreover, the inventory records do not show the history or the values of the inventory, so that estimates were used to arrive at the year-end inventory. He also noticed the poor standard of the appliances, with manufacturers' warranties long expired.
Smith completes his report, with details of the poor internal controls for his partner's review. However, his partner replaces his report with a very brief summary, and a conclusion that the internal control systems are sound and reliable.
Smith makes an appointment to see Chris but is worried as to how he should approach him about Darwin Electrical Appliances' issues.
Required: Discuss the professional and ethical issues faced by Smith and provide an analysis, which can help him deal with the matter with Chris.
|
What are the number of units and the cost of the goods
: A company purchased merchandise to be resold at increasing costs during the year 2011. What are the number of units and the cost of the goods available for sale
|
|
Describe the impact on the auditor report
: You are the audit manager of David Goliath (DG) and you are currently reviewing the audit files for several of your clients for which the audit fieldwork.
|
|
Describe the four main elements of standards
: Describe the four main elements of these standards.
|
|
What is the appropriate inventory value to be reported
: What is the appropriate inventory value to be reported on the December 31, 2020 statement of financial position, assuming the lower of cost
|
|
Discuss the professional and ethical issues faced by smith
: Smith, a young CPA and one of the audit team members for Darwin Electrical Appliances Ltd (Darwin), has developed very good insights into the company's systems.
|
|
Explain when the HPR will be equal to the yield to maturity
: Assume that you bought an 8% coupon bearing bond with 4 years to maturity, Explain when the HPR will be equal to the yield to maturity
|
|
Prepare the journal entry to record income tax expense
: Novak Corporation has one temporary difference at the end of 2020 that will reverse and cause taxable amounts of $53,100 in 2021, $57,800 in 2022, and $63,100.
|
|
Calculate quarterly loan repayment of nicole and keith
: Nicole and Keith borrow $500 000 at 6.1% pa compounding quarterly and agree to make monthly repayments for 20 years. Calculate their quarterly loan repayment.
|
|
How should be treated in the financial report
: How should be treated in the financial report. In your explanation, identify any further information you require to arrive at a conclusion as to treatment.
|