How the threat could be addressed

Assignment Help Finance Basics

Reference no: EM133290920

Case: Your audit client is Quality Constructions (QC), a company that builds small office buildings (3-5 floors) in capital cities around Australia and which is wholly owned by its founder, Kerry Bricker. QC currently has 10 projects at various stages of completion. QC has been profitable for many years, partly because of its policies of offering fixed-price contracts and a 10% refund if projects aren't finished on time. Due to recent flooding in QLD and NSW, QC has been affected by the difficulty of obtaining building supplies and the higher cost of supplies that are available. Consequently, 7 out of the current 10 projects are behind schedule and it is expected that only 6 of these projects will be profitable. In order to protect the viability of the business, QC has decided to pursue larger projects and has just secured a contract to construct a 15-story tower, for which they received a 30% deposit payment just before year-end. QC's finance director (Jessie Smith) tells you that 'this new deal means there's plenty of cash in the bank, even if we lose a few dollars on the small projects'.

Additional information

As part of your audit planning meeting with Quality Constructions you discover that the Melbourne division of your firm has engaged Quality Constructions to build its new office building (on ordinary commercial terms). The new building will be a significant asset for the Melbourne division of your firm.

Required

In accordance with APES 110 (2018), state:

a) whether Quality Constructions is a Public Interest Entity;

b) the most important Threat (briefly explain your answer);

c) whether the threat is at an acceptable level (briefly explain your answer);

d) how the threat could be addressed.

Reference no: EM133290920

Questions Cloud

Great potential when running npv or irr analysis : When should a company or government entity finally decided to cut projects that maybe in the past showed great promise or great potential when running NPV

Financial statements are compiled : Can the management of a company influence the way financial statements are compiled ? Use an example from the JSE listed companies

Development of marketing strategy : Marketing Research is important to the development of a marketing strategy in many ways. Marketing and Promotion can be very costly and if one sets out

Determine there is an arbitrage opportunity : Determine there is an arbitrage opportunity (hint: be sure to pay attention to the difference between the tenor of the forward versus that of deposits)

How the threat could be addressed : the most important Threat (briefly explain your answer) how the threat could be addressed - whether Quality Constructions is a Public Interest Entity

Explain accounting constraints of materiality : Explain the accounting constraints of materiality, Do you agree or disagree with why it is accounted for?

Analyze the legal and regulational boundaries : Analyze the legal and regulational boundaries that the two hospitals may experience due to the type of business structure

Outstanding capital stock of cart company : On July 1, 2021, Dynamic Corporation purchased for cash 40% of the outstanding capital stock of Cart Company.

Analysis of the crypto and forex markets : Analysis of the crypto and forex markets should be constrained to major pairs only - When reviewing US equities, you can split the equities

User Account

All Pages