In: Accounting
QUESTION 2
During the “understanding the entity and its environment” stage of
planning for the audit of Novex (Pty) Ltd you obtain the following
information, inter alia, about the company. 1. The company imports
large quantities of inventory. 2. Some of the products which Novex
(Pty) Ltd sells have expiry dates, after which they are not
useable. 3. The company sells, inter alia, chemicals. 4. Inventory
is stored in several warehouses around Namibia. 5. 40% of the
company’s sales are for cash. 6. During the year under audit,
credit terms and policies were made less stringent to boost sales.
7. The company’s manufacturing division leases some of its assets.
8. Obtaining spares for some of the manufacturing assets which the
company owns, is extremely difficult which has resulted in a number
of machines standing idle.
9. The work force at Novex (Pty) Ltd fluctuates quite significantly
from month to month. Casual labour is brought in frequently for
short periods.
YOU ARE REQUIRED TO identify the financial statement assertions
which will be affected by the above information. Provide
reasons.
financial statement assertions are
1. existence or occurance
2. completeness
3. accuracy
4.valuation
5.rights and obligations
6. presentation and disclosure
financial statement assertions which will be affected bt the above information are as follows
1. existence or occurance
2. completeness
3. rights and obligations
4.valuation and accuracy
5.presentation and disclosure