Reference no: EM132661618
Question - Patrick Delaney owns Quails Hill, a successful winery in the Okanagan region. Quails Hills is a privately owned company. Annual sales are $4,500,000 and he has a $1,200,000 loan with a local bank. Sales are split between wine sales (88%) and wine tasting and catering (12%).
Patrick has excellent personal relationships with his suppliers and has been provided with special contractual terms which allow him delays of up to 120 days to make invoice payments. These arrangements run out this year and he will have 30 days to pay after being invoiced.
The bank has made the $1,200,000 loan to Quails Hill based on an understanding that the company will undergo audits of its financial statements.
Patrick is an astute entrepreneur and has set up an advisory board which consists of his bank manager, another wine grower in the region, his old high school ethics instructor and track coach, himself, and his accountant.
Patrick has been approached be another winery (Gateways Vineyards) to purchase the business from him. Gateway has asked Patrick to provide audited financial statements for the past year.
Required -
1. Patrick has never had his company, Quail Hills, audited before so he is confused as to why Gateway Vineyards wants an audit completed. Please explain to Patrick why Gateway Vineyards would want audited financial statements of Quails Hills?
2. Name three users that would want to examine Quails Hills audited financial statements? What would the users main concern/objective be when examining the financial statements?
3. What three characteristics should the auditors that complete the Quails Hill should possess? Explain the characteristics briefly.
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