Reference no: EM132740411

You are about to complete the planning stage of the audit of Seymour Print Ltd and you are considering your approach to several events that have occurred during the year.

Seymour Print Ltd's revenue for the year is $25 million and profits are $3 million.

Issues

a) A customer has made a claim against Seymour Print Ltd for breach of contract. They claim that products were not delivered in accordance with the contract and this led to them having to engage other contractors to carry out the work at great expense. The customer is suing Seymour Print Ltd for damages of $1 million.

b) A major customer has not paid Seymour Print Ltd for three months and the receivable balance at the year-end for this customer is $120,000. The customer is rumoured to be having significant cash flow difficulties; however, Seymour Print Ltd's directors believe they will be paid as the customer is one of long standing and has always paid in the past.

c) Seymour Print Ltd recently purchased new equipment for the factory. This replaced old machinery, which is no longer being used, which is included in the balance sheet at a net written down value of $2,250,000. The old equipment has not reached the end of its originally expected useful life and remains on the balance sheet and is being depreciated in line with previous years.

Required

Problem 1: Describe and explain the substantive procedures that would provide sufficient appropriate evidence in relation to the issues outlined above.