Reference no: EM132602584
Question - Natali Bryan is the engagement partner for the financial report audit of Patterson Equipment Ltd for the year ended 31 December 2019. The following material events or transactions have come to Natali Bryan's attention before she is scheduled to issue her report on 29 February 2020.
On 14 January 2020, Patterson Equipment Ltd settled and paid a personal injury claim of a former employee as a result of an accident that occurred in March 2018. The company has not previously recorded a liability for the claim.
On 17 January 2020, Patterson Equipment Ltd agreed to purchase for cash the outstanding shares of recreational equipment Ltd. This acquisition is likely to double the sales volume of Play Equipment.
On 20 January 2020, the directors became aware of broken glass found in their prepackaged Sandpits. The product had only been on sale for two weeks and had been purchased directly from the manufacturer, Sandpit Ltd, an unrelated company in Thailand, one week prior to being introduced to the public.
On 3 February 2020, a plant owned by Patterson Equipment Ltd was damaged in a flood, resulting in an uninsured loss of inventory.
Required -
1. Discuss the typical audit procedure.
2. For each of the above events or transactions, identify audit procedures that should have brought the item to the auditor's attention, and determine the treatment required in the financial report for the year ended 31 December 2019.