Balance Sheet For Magnificent Homeware Ltd As At 31 March 2018 2018 2017 2016 $(000) $(000)...

Balance Sheet
For Magnificent Homeware Ltd
As At 31 March 2018
	2018	2017		2016
	$(000)	$(000)		$(000)
Current assets
Bank	-	-		1,804
Accounts receivable	5,200	3,250		1,620
Allowance for bad debts	(210)	(350)		(380)
Inventory	4,120	2,550		1,850

Total current assets	9,110	5,450		4,894
Non-current assets
Plant & equipment	5,480	4,900		4.300
Retail shop Wellington	2,000	-		-

Total non-current assets	7,480	4,900		4.300
Total assets	16,590	10,350		9,194
Current liabilities
Bank overdraft	380	350		-
Mortgage	200	100		100
Accounts payable	2,200	2,026		2,890

Total current liabilities	2,780	2,476		2,990
Non-current liabilities
Mortgage	3,000	1,600		1,600
Total liabilities	5,500	4,076		4,540

Net assets	10,810	6,274		4,654
Shareholders’ equity
Shares	200	200		200
Retained profits	6,074	4,454		3,036
Net profit after tax for the year	4,536	1,620		1,418

Shareholders’ equity	10,810		6,274		4,654

b) Using the financial information above, provide analytical calculations (supported by formulae and figures) for the purpose of reviewing the financial performance and the financial position of Magnificent Homeware Ltd. Your focus should be to highlight matters of significant concern and trends that appear unusual.

c) From the analysis in (b) above, what are the audit risk factors for inventory and accounts receivable?

d) How would the financial statement analysis in (b) above assist to plan your audit approach for Magnificent Homeware Ltd?

e) From the information above (excluding the financial statements) list the potential problem areas and any major concerns (where there could be risk or material misstatement) that you will need to consider as part of the plan for the 2018 audit for this company. You must provide brief reasons why each of the areas you have listed require special consideration. You should be able to comment on at least 10 areas.

Expert Solution

ekkarill92 answered 1 year ago

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