Question

JorEx a Jordanian listed company issued its financial statements on the 31^st of December 2015. The company does not issue comparative statements. The company Audit report in 2014 was qualified due to material departure from IFRS in accounting for inventory. The company now Accounts for their inventory using FIFO.

suppose you are an auditor JorEx asked to review the financial statements.

Required:

• 1. Can you conduct a review Explain your answer?
• 2. Based on your answer what would you advise PalEX to do?
• 3. If they accept your advise and you performed all your procedures write the report

PS. please do the solution according to the AUDITING AND ASSURANCE SERVICES . sixteenth edition

Answer 1

Ans: Review of financial statement

• Conduct a ratio analysis with historical, forecasted, and industry results

• Investigate findings that appear to be inconsistent

• Inquire about the procedures for recording accounting transactions

• Investigate unusual or complex situations that may impact reported results

• Investigate significant transactions occurring near the end of the accounting period

• Follow up on questions that arose during previous reviews

• Inquire about material events that occurred after the date of the financial statements

• Investigate significant journal entries

• Review communications from regulatory agencies

• Read the financial statements to see if they appear to conform with the applicable financial reporting framework

• Review the management reports of any accountants who reviewed or audited the entity's financial statements in prior periods

The company shall issue comparative statement along with current year financial statement as it is listed and other regulatory compliance require it to issue comparative financial information also.

Auditor shall consider previous year modification in auditors opinion and establish continuing relevence on current year's fianancial opinion.

In the given case, previous years statements were modified due to non compliance of IFRS for Inventory accounting. Therefore for audit of current year auditor shall look into correct accounting of Inventory and any effect of such compliance shall be disclosed in comparative financial information and in notes to accounts.

And if during current year correct accounting effect as per IFRS of such adjustment have been given in presentation and disclosure of financial statement, auditor can issue unmodified opinion.