Reference no: EM131046900
Subsequent Facts and Events. In connection with their audit of the financial statements of Swan Mfg. Corporation of Ayutthay, Thailand for the year ended December 31, 20X4, Virameteekul, Kanchana & Banharn, Chartered Accountants (CA) review of subsequent events disclosed the following items:
1 January 3, 20X5: The government approved a plan for the construction of an express highway. The plan will result in the expropriation of a portion of the land owned by Swan Mfg. Corporation. Construction will begin in late 20X5. No estimate of the condemnation award is available.
2 January 4, 20X5: The funds for Baht 1,000,000 loan to the corporation made by the company president, Somsak Na Lan, on July 15, 20X4, were obtained by him from a loan on his personal life insurance policy. The loan was recorded in the account "loan from officers." Mr. Somsak's source of the funds was not disclosed in the company records. The corporation pays the premiums on the life insurance policy, and Mrs. Somsak, wife of the president, is the beneficiary.
3 January 7, 20X5: The mineral content of a shipment of ore, en route on December 31, 20X4, was determined to be 72 percent. The shipment was recorded at year-end at an estimated content of 50 percent by a debit to raw material inventory and a credit to accounts payable in the amount of Baht 824,000. The final liability to the vendor is based on the actual mineral content of the shipment.
4 January 31, 20X5: As a result of reduced sales, production was curtailed in midJanuary and some workers were laid off. On February 5, 20X5, all the remaining workers went on strike. To date the strike is unsettled.
Required:
Assume that the items described above came to your attention prior to completion of your audit work on February 15, 20X5. For each item:
A. Give the audit procedures, if any, that would have brought the item to your attention. Indicate other sources of information that may have revealed the item.
B. Discuss the disclosure that you would recommend for the item, listing all details that you would suggest should be disclosed.
Indicate those items or details, if any, that should not be disclosed. Give your reasons for recommending or not recommending disclosure of the items or details
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Discuss the disclosure that you would recommend
: January 31, 20X5: As a result of reduced sales, production was curtailed in midJanuary and some workers were laid off. On February 5, 20X5, all the remaining workers went on strike. To date the strike is unsettled.
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Sale of a fixed asset at a substantial profit
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