State the audit evidence that you should expect to find

Reference no: EM132985769

Question: You are the manager responsible for the audit of Ibrahim and Brothers.

The company's principal activity is wholesaling frozen fish. The draft consolidated financial statements for the year ended 31 March 20X8 show revenue of MVR 67.0 million (20X7 - MVR 62.3 million), profit before taxation of MVR 11.9 million (20X7 - MVR 14.2 million) and total assets of MVR 48.0 million (20X7 - MVR 36.4 million). The following issues arising during the final audit have been noted on a schedule of points for your attention.

(a) In early 20X8 a chemical leakage from refrigeration units owned by Ibrahim Brothers caused contamination of some of its property. Ibrahim Brothers has incurred MVR 0.3 million in clean-up costs, MVR 0.6 million in modernisation of the units to prevent future leakage and a MVR 30,000 fine to a regulatory agency. Apart from the fine, which has been expensed, these costs have been capitalised as improvements.

(b) While the refrigeration units were undergoing modernisation Ibrahim Brothers outsourced all its cold storage requirements to Shareef Warehousing Services. At 31 March 20X8 it was not possible to physically inspect Ibrahim Brothers' inventory held by Shareef Warehousing Services due to health and safety requirements preventing unauthorised access to cold storage areas. Ibrahim Brothers' management has provided written representation that inventory held at 31 March 20X8 was MVR 10.1 million (20X7 - MVR 6.7 million). This amount has been agreed to a costing of Shareef Warehousing Services' monthly return of quantities held at 31 March 20X8.

(c) Ibrahim and Brothers owns a residential apartment above its head office. Until 31 December 20X7 it was let for MVR 3,000 a month. Since 1 January 20X8 it has been occupied rent-free by the senior sales executive.

Required
In undertaking your review of the audit working papers and financial statements of Ibrahim Brothers for the year ended 31 March 20X8, for each of the above issues:
(i) Comment on the matters that you should consider; and
(ii) State the audit evidence that you should expect to find.

Reference no: EM132985769

Questions Cloud

Which position the company should take in the futures market : Which position the company should take in the futures market on September 1, 2020 and what is the effective price (after taking account of hedging)

Describe a possible way to obtain a stratified random sample : Suppose a student opinion survey is to be conducted in order to determine whether breakout rooms should be used during online Zoom classes

Compare and contrast the responsibilities of management : Compare and contrast the responsibilities of management, and of auditors, in relation to the assessment of going concern

Discuss the importance of maintaining independence : Discuss the importance of maintaining independence. Independence has always been a fundamental aspect of the accountancy profession.

State the audit evidence that you should expect to find : Comment on the matters that you should consider and State the audit evidence that you should expect to find

What would normally give in duties as a public accountant : What would normally give in duties as a public accountant. Polo Babywear Ltd was formed on 30 August 2013 and its first financial year ended on 30 June 2015.

How did the key principles of due care develop : How did the key principles of 'due care' develop through the Kingston Cotton Mill Co. case, the London and General Bank case and the Pacific Acceptance case?

Prepare and extract of both p & l account : Prepare and extract of both P & L account and Balance sheet as at 31 Dec 2020

Determine the effective annual rate : Determine effective annual rate, or EAR (annual percentage yield) is? You are considering an investment that has a nominal annual interest rate of 6.30 percent.

User Account

All Pages