Reference no: EM132564038

AUDIT

You are a financial auditor who works in one of the public accountant firm. You are assigned by your partner to audit a client. This client listed in stock market which uses IFRS as the accounting standard. This client is a distribution company which product is home appliances. Clients sell goods to retail stores, both modern and traditional home appliances.

The following are the things that you encounter when auditing that client:

a) The client has 10 (ten) operational vehicles purchased five years ago, amounting to IDR 200 million, the client uses the straight-line method and estimates of economic life for 5 years and at the time when you audit the book value the client has reported at 0. The client sells all 10 (ten) vehicle for operations are valued at IDR 80 million each and recognize total sales of IDR 800 million as gain on sale of long-lived assets. You have confirmed to the buyer and checked the sales documents such as receipts and so on, where everything is appropriate.

b) You do inventory audit. Total physical inventory and company records are appropriate. However, there is an outdated inventory, a product that has not been sold for a long time, so that its physical appearance has faded and is not like new anymore. The client does not make adjustments to the decline in the value of obsolete inventory. The client said that they would make a bazaar by selling the obsolete goods directly to the end user, then adjusting when the goods were sold.

c) The client has an investment in the form of securities in a material amount. At the end of the period, the value of shares owned by clients has decreased. Decreased to below the purchase price of the stock. The client does not include the impairment in the comprehensive loss section, when an inquiry is made, the client says that due to the impairment due to a pandemic outbreak, and after the pandemic outbreak ends, it is assumed that the value of the stock will rise again.

d) You do sampling to confirm the client's accounts receivable to its customers, which are both modern and traditional retail home appliance stores. You do not confirm to all customers, but only do sampling. The sample is chosen using the monetary unit sampling method, where you choose based on customers who have a material amount. After the whole sample is confirmed, you find that there are some customers whose confirmed amounts are different, but the amount is immaterial. After use audit software to detect the unrecorded transaction, it found that it because there are unrecorded sales returns in small amount. The client acknowledged this and makes adjustments.

Questions

Question a. For each point number a) - d), identify each point as "fair" or "finding". Provide reason underline that answer!

Question b. For each point number a) - d), identify each point, type of audit objective and type of audit procedures. Provide the reason!