Miss Yu is performing the audit on leases of TipuPte Ltd for the year ended 31...

Miss Yu is performing the audit on leases of TipuPte Ltd for the year ended 31 December 2016. From the ledger, Miss Yu noticed that there are three items. which are on lease, i.e. a van, a lathe machine and the oven. As part of the audit, Miss Yu would send standard confirmation letters to the lessors. Two days before the end of the fieldwork, Miss Yu received confirmation from the van's lessor. Miss Yu's client has short taken the van lease by $10,000. Miss Yu sent the second reminder confirmation and managed to receive the confirmation from the lathe machine's lessor. The lease would only start from 1 January 2017. Miss Yu has to yet receive any confirmation pertaining to the leasing of the oven.

Required

a. What should Miss Yu do in the future to make sure that the confirmation letter are received and answered promptly?

b. There are discrepancies to two of the items. What further action should Miss Yu take?

Solutions

Expert Solution

Miss Yu is performing the audit on leases of TipuPte Ltd for the year ended 31 December 2016.

Ans: a) Miss Yu do in the future to make sure that the confirmation letter are received and answered promptly

Three actions that Miss Yu must take to ensure this doesn't happen are:

1. Miss Yu having gained the experience that holdup can happen in receiving confirmations can occur should ask for confirmations well in advance from next year.

2. Miss Yu can send a second and then third prompt for confirmation if needed.

3) Miss Yu can do a telephonic conversation and ask to send the corroboration.

Ans:b) For the discrepancies Jack would:

1) For 10,000 not paid by his client for lease, he has to declare this to his client & ask him to also correct the liability value or create a new one.

2) The value of the lease has to be paid has to be mention in the auditor's report.

For the other discrepancy:

1) The books include correcting because the lease has not been started this year. For this it has to be struck from the balance sheet of this year.

2) During memo to financial statements, an exposé has to be given. In Auditor's report also this thing would be highlighted.

ekkarill92 answered 3 weeks ago

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