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    Swapnil Mahanta
    The firm must allocate more experienced staff to audit Centipede Co. as it is a new client with inherent risks such as unfamiliar accounting policies and controls. More substantive testing will also be required due to inability to test controls on-site during the interim audit. The auditor must carefully inspect inventory valuation and sales of assets to ensure compliance with accounting standards and identify any risks of misstatement. Disclosure issues regarding director payments must also be addressed.

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    153

    Uploaded by

    Swapnil Mahanta
    33 views1 page
    The firm must allocate more experienced staff to audit Centipede Co. as it is a new client with inherent risks such as unfamiliar accounting policies and controls. More substantive testing will also be required due to inability to test controls on-site during the interim audit. The auditor must carefully inspect inventory valuation and sales of assets to ensure compliance with accounting standards and identify any risks of misstatement. Disclosure issues regarding director payments must also be addressed.

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    The firm must allocate more experienced staff to audit Centipede Co. as it is a new client with inherent risks such as unfamiliar accounting policies and controls. More substantive testing will also be required due to inability to test controls on-site during the interim audit. The auditor must carefully inspect inventory valuation and sales of assets to ensure compliance with accounting standards and identify any risks of misstatement. Disclosure issues regarding director payments must also be addressed.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    33 views1 page

    153

    Uploaded by

    Swapnil Mahanta
    The firm must allocate more experienced staff to audit Centipede Co. as it is a new client with inherent risks such as unfamiliar accounting policies and controls. More substantive testing will also be required due to inability to test controls on-site during the interim audit. The auditor must carefully inspect inventory valuation and sales of assets to ensure compliance with accounting standards and identify any risks of misstatement. Disclosure issues regarding director payments must also be addressed.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    The centipede co.

    is a new client for the firm The firm must allocate more experienced team
    bringing in some inherent risks such as the firm is as the conditions are quite uncertain. Also
    unfamiliar to accounting policies, transaction, enough time must be allotted for process to be
    internal controls, structure etc. carried out before an audit takes place
    As in the interim audit it was found that the This is an indication that proper inventory
    recorded inventory was more than the physical controls have not been in place hence the
    inventory thereby inflating the current assets of auditor cannot rely on the inventory data. More
    the company. substantive procedure must be carried out to
    confirm any significant differences arising
    As noted by the audit assistant, some lines of The auditor must conduct a detailed testing of
    inventory were very old some even extending to NRV and costs to confirm whether the inventory
    90 days. It may happen that these inventory are is correctly valued also the auditor needs to
    carried at cost but have a NRV which is lower, assess the condition of the inventory so they
    hence overstating the closing inventory and the could be rightfully written off the financial
    currents assets statements
    As the audit team were not able to visit the four The audit team has to place more test of
    sites during interim audit, it has not tested the controls and more substantive tests during the
    internal control and systems of the sites and only final audit to confirm that the systems are
    has to rely on the general ledger which is client effective and properly working in place
    generated. Hence there is a very high risk of
    material misstatement and control risk
    The fifth building was sold this year at a loss of The auditor must inspect carefully as how the
    $825000. There may be a risk of improper asset has been treated i.e. the accounting
    carrying value of the asset as the company might estimates and the estimate of the scrap value.
    overstate it to reduce the loss taken to the PL Also the auditor must verify whether the asset
    statement has been removed from the non-current asset
    ledger
    One of the customers of the client has filed a law The auditor must take legal counsel on this
    suit against the company for consistently selling matter and assess the chances that the company
    goods of poor quality. There may be a risk of might lose the litigation and recognise the
    client either not recording any provision or liability accordingly also the team must look at
    understating the provision monetary amount of the claim and discuss with
    the concerned parties as to what amount must
    be appropriate.
    The directors have not disclosed their names and The auditor needs to insist that the directors to
    the respective payments, which is in line with be compliant with the local laws and regulation
    the IFRS but not with the local legislation. The and disclose the appropriate results according to
    IFRS framework clearly states that in the case of the law. And the auditor needs to be alert to the
    contradiction the local legislation takes the reason why the directors didn’t disclose and
    precedence. Hence the local directors have not confirm the fact whether directors have overtly
    been compliant with the necessary standards been paid
    also there may be a risk that directors have
    overtly paid themselves hence hesitating to
    disclose the facts

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