Question

1.)Discuss the audit issue in each case that has to be considered and what impact these issues would have on the audit opinion. Use relevant standards to answer to question.

a.) Company A uses the last-in first-out inventory valuation method for its closing inventory, which is a significant item found in its statement of financial position. The difference between first-in first-out and last-in-first-out has a material effect on the closing inventory balance.

b.) Company A is a parent company owning different subsidiaries. One of these is subsidiaries is Company X, a self-sustaining foreign subsidiary with manufacturing and distribution facilities throughout the World. While the Company A Group prepared its financials for the year ended 30 June 2017 the accounts included all the subsidiaries except for Company X which was attached separately. The Financials included a note stating that the senior executives believe it would be misleading to consolidate Company X due to its unique and different operations from all other subsidiaries within the vision group. The note also shows details of the intra-group transactions.

c.) Company A has the following audit problems:

• The company did not update the listing for the changes in shareholding of the company

• The director’s minutes were not prepared for the current year

• No annual general meeting (AGM) was held last year

• There was no written consent from the directors to act

• The company did not even justify the reason for not keeping proper records and holding the AGM

Answer 1