What substantive procedures should be performed for each

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Reference no: EM133507321

Case Study: A fire happened at a house which resulted in a lot of damage. The house had fruits and vegetables. The inventory value at the house before the fire occurred was $900,000. The owner of the house was able to savage 3000 boxes of fruits. However 2000 boxes were lost. 1000 boxes of fruit and 1000 boxes of vegetables. The average cost of fruits is $0.80 per fruit and vegetables were $1.35 per vegetable. A $500,000 provision was recorded to eliminate the value of the 2000 lost boxes from the inventory.

Due to the price increase that impacted some of the production of fruit, HealthyFoods incurred larger production costs.

The company had a mixup in a shipment of fruits. Instead of apples, oranges were shipped. The company replaced the incorrect shipment with the correct products at no charge. The oranges were added back to inventory in the accounting system. The owner was informed that the returned oranges boxes remained unsold. The box numbers were not present on any of the count sheets during the inventory count.

HealthyFoods introduced limited edition vegetables. It lead to an increase in sales and higher inventory levels. However 1500 boxes of carrots remained in inventory even though the it was ceased to be sold in November. The company assured Henry that demand for carrots would resurge in the spring of 2024 and the carrots would not expire until 2026.

A quality control inspection revealed a quality issue with a box of fruits. HealthyFoods recalled the affected products to ensure customer satisfaction despite the problem only relating to the chewiness of the carrots. Nothing has been recorded yet as the company is still investigating.

One of the company's suppliers had manufacturing issues causing a delay in delivering fruits for production. The company faced an inventory shortage but continued with production. Average production costs for the fruits increased making the company unsure about cost recovery for the fruits produced but dud not record any adjustments in the accounting system.

Question 1: explain the affect of each event on inherent and control risks. Explain the assertions at risk for each event and why.

Question 2: what substantive procedures should be performed for each event to test the assertions

Reference no: EM133507321

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