Question

In: Accounting

You are the audit manager at Deloitte and you are finalising the audits for 30 June...

You are the audit manager at Deloitte and you are finalising the audits for 30 June 2021. The following
independent and material matters have come to your attention:
1. WorldCom.Social Ltd provides social housing to approximately 1500 tenants at below normal market
rents. WorldCom.Social is a reporting entity under the Corporations Act. During the year, there has been
a review of the basis for calculating the lives of the houses owned by the organisation. Previously, these
houses were assessed to have a useful life of 30 years, but this has now been changed to 50 years.
During your audit work, you reviewed the WorldCom.Social Ltd asset management policy which only
plans for maintaining and upgrading properties up to 30 years old. You also found that, during the year,
WorldCom.Social Ltd demolished a house that it built in 1989.
2. Enron Ltd is a holding company with a few wholly owned subsidiaries. One of these, Kingsemi Co.,
Ltd, is a self-sustaining foreign subsidiary with manufacturing and distribution facilities throughout South-
East Asia. The group accounts of Enron and its subsidiaries consist of the consolidated statements of
Enron and its subsidiaries and exclude those of Kingsemi Co., which are attached separately. The
consolidated statements include a note stating that the directors believe it is misleading to consolidate
Kingsemi Co. because its operations are very different from those of the rest of the group and are
carried out under significantly different conditions. The note includes details of intercompany balances
and transactions.
3. Newmont Goldcorp Pty Ltd, is a family run business, operating a small goldmine. The board is
represented by Mr. Cristiano Ronaldo and his brother, Mr. Hugo Ronaldo, who are also the predominant
shareholders. In the final audit meeting, Mr. Hugo has told you he suspects that the vein they are
presently mining will last 13 months at the least to 17 months at the most. He has also noted that after
they extract the gold, they will close the business, let the license expire and retire to Madeira. Mr. Hugo
then showed you a land-surveyor’s report confirming his statement regarding the amount of gold in the
vein. This information has not been disclosed in the financial report.
4. CARE Australia is a non-for-profit organisation and a non-reporting entity. In the last three years, you
have been performing their audits in accordance with its constitution. The financial reports are prepared
by another accounting firm on behalf of CARE Australia’s board of directors, because CARE Australia
does not have internal accounting expert to perform this function. During your review of the internal
control structure, you acknowledged that CARE Australia did not have adequate controls over the
collection of income to enable you to be satisfied that all income received was recorded. However, you
have been satisfied that the organisation has accurately accounted for all income recorded.
You are required to:
A) Identify the type of auditor’s report to be issued for each of the above situations.
B) Justify your answer by discussing the relevant audit issues you have considered in forming your
opinion.

Solutions

Expert Solution

(A) Type of Auditor's report

1)Adverse opinion

2)Disclaimer of opinion

3) Unqualified opinion

4) Qualified opinion

(B) Justification

1) Adverse opinion is given . As firm financial records do not confirm GAAP . The company has tried to mislead the material information as it has changed the useful lives of houses from 30 to 50 years even there is no change in the management policy which will definately be done on account of fraud .

2) Disclaimer of opinion is given. Since, there is some missing information that they have not provide the complete information about its subsidiary Kingsemi co., it doesnot matter that it's operations are same or not but they have to provide complete information. Due to which auditor is unable to complete accurate audit report.

3)Unqualified opinion is given . because there is no material misstatement is found in the financial statement and all the inforation provided is true and fair.

4) Qualified opinion is given .Because the company has not maintained financial records in accordance with GAAP but no misrepresentation are identified . As , company doesnot maintain proper income statement .However, we are satisfied that co. has provided all income statements.

If you find answer suitable please provide the feedback


Related Solutions

You are an Audit Senior currently planning the 30 June 20X9 audits of Comp Limited (Comp),...
You are an Audit Senior currently planning the 30 June 20X9 audits of Comp Limited (Comp), Health Limited (Health) and News Limited (News). At recently scheduled planning meetings with Comp, Health and News, you obtain the following overview of this year’s operations for each of the three client companies: Comp is a manufacturer of computer hardware. The old costing system that was developed in- house, could no longer keep up with the complex and detailed manufacturing costing process that provides...
You are an Audit Senior currently planning the 30 June 20X9 audits of Comp Limited (Comp),...
You are an Audit Senior currently planning the 30 June 20X9 audits of Comp Limited (Comp), Health Limited (Health), and News Limited (News). At recently scheduled planning meetings with Comp, Health, and News, you obtain the following overview of this year’s operations for each of the three client companies: Comp is a manufacturer of computer hardware. The old costing system that was developed in- house, could no longer keep up with the complex and detailed manufacturing costing process that provides...
You are an Audit Senior currently planning the 30 June 20X9 audits of Comp Limited (Comp),...
You are an Audit Senior currently planning the 30 June 20X9 audits of Comp Limited (Comp), Health Limited (Health) and News Limited (News). At recently scheduled planning meetings with Comp, Health and News, you obtain the following overview of this year’s operations for each of the three client companies: Comp is a manufacturer of computer hardware. The old costing system that was developed in- house, could no longer keep up with the complex and detailed manufacturing costing process that provides...
You are the audit senior on the audit for the year ended 30 June 2019 of...
You are the audit senior on the audit for the year ended 30 June 2019 of Neptune Pty Ltd, a large manufacturer of lighting accessories. This is the first year that your firm has performed Neptune’s audit. As part of the planning work, you have annualised Neptune’s interim financial accounts and performed analytical procedures on the annualised figures and compared the results to industry averages and last year’s audited financial information. The results are given below. Industry Average Neptune Pty...
You are an audit manager currently finalizing your 31 December 2013 audits. The following independent and...
You are an audit manager currently finalizing your 31 December 2013 audits. The following independent and material matters have come to your attention: 1. The audit of the statutory records of Whale Ltd, a reporting entity, revealed the following problems: •   Failure to update the members’ register for changes in shareholders; •   Failure to obtain written consent from directors to act; •   Directors’ minutes not prepared in respect of the current year; •   Failure to hold the AGM in respect...
You are an audit manager currently finalizing your 31 December 2013 audits. The following independent and...
You are an audit manager currently finalizing your 31 December 2013 audits. The following independent and material matters have come to your attention: 1.   The audit of the statutory records of Whale Ltd, a reporting entity, revealed the following problems: •   Failure to update the members’ register for changes in shareholders; •   Failure to obtain written consent from directors to act; •   Directors’ minutes not prepared in respect of the current year; •   Failure to hold the AGM in respect...
You are an Audit Senior currently planning the 30 June 20X9 audit of Technology Limited, an...
You are an Audit Senior currently planning the 30 June 20X9 audit of Technology Limited, an Australian-owned company that produces and exports computer chips to China. At a recent planning meeting with Technology Limited’s senior staff, you obtained the following overview of this year’s operations: Tight checks by Australian custom officials have delayed several shipments of computer chips. These delays have angered Chinese customers who are threatening to deduct 20% from the amounts owing as compensation for lost production time....
You are an Audit Senior currently planning the 30 June 20X8 audit of Forest Limited, an...
You are an Audit Senior currently planning the 30 June 20X8 audit of Forest Limited, an Australian-owned company that produces and exports woodchips to Japan. Forest’s operations are located in Eden, on the far south coast of NSW. Timber is purchased from forests nearby, processed into woodchips and immediately stockpiled for export at the company’s shipyards at Twofold Bay. Forest contracts timber cutters to deliver set tonnages of logs to its mill throughout the year. Woodchips are transported to Japan...
You are an Audit Senior currently planning the 30 June 20X9 audit of Technology Limited, an...
You are an Audit Senior currently planning the 30 June 20X9 audit of Technology Limited, an Australian-owned company that produces and exports computer chips to China. At a recent planning meeting with Technology Limited’s senior staff, you obtained the following overview of this year’s operations: Tight checks by Australian custom officials have delayed several shipments of computer chips. These delays have angered Chinese customers who are threatening to deduct 20% from the amounts owing as compensation for lost production time....
You are an Audit Senior currently planning the 30 June 20X8 audit of Forest Limited, an...
You are an Audit Senior currently planning the 30 June 20X8 audit of Forest Limited, an Australian-owned company that produces and exports woodchips to Japan. Forest’s operations are located in Eden, on the far south coast of NSW. Timber is purchased from forests nearby, processed into woodchips and immediately stockpiled for export at the company’s shipyards at Twofold Bay. Forest contracts timber cutters to deliver set tonnages of logs to its mill throughout the year. Woodchips are transported to Japan...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT