Explain the implications for the financial statements

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Reference no: EM133554568 , Length: word count:1200

Auditing Principles

Question 1: It is Friday the 20th of August, you have just returned home after a tong week of auditing SCAMS stock accounts. You turn on the evening news and the second news item you see is a report that there 12 babies all around the country who are either dead or fighting for life in hospital, all of which seem to have been feeding on SCAM's home brand baby formula. It is believed that a batch of the baby formula may have been contaminated with Listeria. SCAM Supermarkets has yet to make a formal comment.

Explain the implications for the financial statements, your audit and any audit procedures that should be performed.

Question 2: The audit report for SCAM Supermarkets wasdue to be signed on Monday the 30th ofOctober, however at 10:30pm on Sunday the29th of October a cargo plane missed therunway at Tullamarine Airport in Melbourneand crashed into SCAM's Distribution Centre.Initial reports indicate that the entireDistribution Centre has been lost, including thestock within the centre. Thankfully theincident happened on a Sunday when therewere virtually no staff on duty, however 2security guard are missing, presumed dead,and 1 is critically injured and fighting for life inhospital.

Explain the impact of this incident on the financial statements and upon the auditreport, including any audit further auditprocedures that may be necessary?

Question 3: It is November 10, you are at the SCAM'S audit closing meeting. Present are David Seedman and Virginia Frumpella. David announces that SCAM is planning to develop a better and new timesheet management system to integrate with the payroll system that will be an App that sits on employees phones. Instead of clocking on an off manually with time clocks on a wall, which is very 20th century, staff will now clock in using their phone which integrates with the CPS system on their mobile device. The beauty of this is that the GPS on their phone, will automatically clock staff out on a break when certain staff are more than 50 meters away from the store unless they are a paygrade that allows them to be 'mobile'. David is very excited about the savings that the system might save SCAM in terms of wages paid for unofficial breaks.

David expects the system to be in the testing phase by March next year and fully implemented by June 1". Outline the plan on how to audit the development of the new timesheet management system for next years audit

Question 4: Near the end of the meeting Virginia announces that she is 5 months pregnant and that she is going to take early maternity leave in two months time. David has said that he has been particularly impressed with how well your audit manager seems to have grasped the operations of SCAM in such a short period of time. He would like your Audit Manager to come take Virginia's place on secondment as Financial Controller until 1 June next year, when Virginia plans to return to work.

Would accepting this secondment engagement create any issues for APKD's continuance as auditors for SCAM Supermarkets Ltd?

Reference no: EM133554568

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