Answered: conceptual framework of accounting

Business

Accounting

conceptual framework of accounting

Contemporary Auditing

11th Edition

ISBN:9781337650380

Author:KNAPP

Publisher:KNAPP

Chapter2: Audits Of High-risk Accounts

Section2.9: Powder River Petroleum International, Inc.

Problem 3Q

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You are an auditor of the company ABC. During the audit of the accounting statements it is found that ABC has recognized in its assets the following elements: algoods which are immovable for a perlod of 3 years and which are valued at their acquisition price b) goods owned by XIZ that it has to sell on its behalf with a commission of 10%; and ) the remuneration of the lawyer who represented the company in a legal dispute. Based on the conceptual framework of accounting, comment on the above.
You are the auditor in charge of the audit of Irene PLC, which has a 30 June year end. The subsequent events review for the year ended 30 June 2022 revealed that, on 1 August 2022, a receiver was appointed at a major customer. At 30 June 2022 that customer owed GHS 150,000 and goods costing GHS 200,000 made to that customer’s specification were held in inventory. Both these amounts are material.RequiredList the matters to which you would direct your attention in respect of the above in relation to the audit for the year ended 30 June 2022, if the audit report on the financial statements has not yet been written.
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Alexander Robinson, a junior auditor working for Big One Accounting Firm. He is included in the audit team engaging in the audit the Financial Reports of Complicated Ltd., a listed company on AST. When evaluating audit results for assets in the audit, Alexander has set the preliminary judgment about materiality to be $67,000. He then allocated the materiality to all the asset accounts. The account balances, performance materiality and estimated overstatements in the accounts are shown below: Account Account balance Performance materiality Estimate of total overstatements Cash 60,000 6,000 5,500 Account receivable 1,300,000 20,000 500,000? Inventory 2,100,000 60,000 45,000 Other assets 360,000 24,000 23,000 Total 4,090,000 110,000 Alexander has chosen a sample of $500,000 in Accounts Receivable. He tested it and uncovered $6000 in overstatement. He then checked on the individual accounts and all accounts in the total assets against the allocated performance…
You are the audit team assign to audit the unaudited set of financial statements for XYZ Company Ltd. for year ended 30 June 2002. Prepare written report to highlight the audit procedures to be used to substantiate/confirm the amounts reported for following items on the financial statements provided: Purchases and accounts payable
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b) You are the manager in charge of the audit of Nananom Company, a public limitedliability company which manufactures specialist equipment and costumes for usein Kumahwood and Nafftti films in Ghana. Audited revenue is Ghc 100 million with profit before tax of Ghc 6.25 million.Audit work up to but not including, the obtaining of written representations hasbeen completed. A review of the audit file has disclosed the following outstandingpoint:KumahwoodNananom Company is facing a potential legal claim from the Kumahwood company in respect of a defective equipment that was supplied for one of their films. Kumahwood sustains that the equipment built was not robust enough, whilethe directors of Nananom argue that the specification was not sufficiently detailed.Nananom were of the view that using such sophisticated equipment under conditions that require heavy falls, may render them not in the best of working conditions after a couple of films produced. However, this is what…
You are auditing Crown Corporation for the year ended 2022, Its reported net income for the year 2021 and 2022 were P 3,000,000 and P 4,000,000, respectively. During your audit, the following errors were revealed: 1. The inventory at the end of 2022 and 2023 were P 20,000 understated and P 18,000 overstated, respectively. 2. Recalculating the depreciation charges for 2023, you found out it was short by P 4,000. 3. The 15,000 insurance premium for three years was recorded using the income statement approach on January 1, 2021. No expense amount was extracted from the balance at the end 2021 and 2022. 4. An equipment was sold on December 31, 2022 for P 32,000. Its related cost was P 200,000 with zero carrying value on date of sale. The sale transaction was recorded on January 10, 2023. QUESTIONS: What is the correct net income for the year 2022? What is the correct net income for the year 2023?
Consider the following material and independent situations (i) to (iii) below.In each situation, the following dates apply:• Balance date: 30 June 2021• Date of audit report: 16 August 2021• Audited financial report and audit report sent to shareholders: 23 August 2021• Annual general meeting: 30 September 2021(i) The client purchased raw materials that were received before the financial year end. The purchase was recorded based on its estimated value. The supplier’s invoice, received on 30 July 2021, showed that the cost was substantially different from the estimated value.(ii) On 10 August 2021, the directors signed a contract to upgrade the client’s airconditioning system. The first payment of $100,000 is due on 1 September 2021. Work will be completed by 30 June 2022, and the final contract payment will be made at that time.(iii) On 25 August 2021, the general manager informed you that on 18 August 2021 the directors decided to sell land that the client was holding as a long-term…