Question

You are a financial auditor who works in one of the public accountant firm. You are assigned by your partner to audit a client. This client listed in stock market which uses IFRS as the accounting standard. This client is a distribution company which product is home appliances. Clients sell goods to retail stores, both modern and traditional home appliances. The following are the things that you encounter when auditing that client:

a) The client has 10 (ten) operational vehicles purchased five years ago, amounting to IDR 200 million, the client uses the straight-line method and estimates of economic life for 5 years and at the time when you audit the book value the client has reported at 0. The client sells all 10 (ten) vehicle for operations are valued at IDR 80 million each and recognize total sales of IDR 800 million as gain on sale of long-lived assets. You have confirmed to the buyer and checked the sales documents such as receipts and so on, where everything is appropriate.
b) You do an inventory audit. Total physical inventory and company records are appropriate. However, there is an outdated inventory, a product that has not been sold for a long time, so that its physical appearance has faded and is not like new anymore. The client does not make adjustments to the decline in the value of obsolete inventory. The client said that they would make a bazaar by selling the obsolete goods directly to the end user, then adjusting when the goods were sold.
c) The client has an investment in the form of securities in a material amount. At the end of the period, the value of shares owned by clients has decreased. Decreased to below the purchase price of the stock. The client does not include the impairment in the comprehensive loss section, when an inquiry is made, the client says that due to the impairment due to a pandemic outbreak, and after the pandemic outbreak ends, it is assumed that the value of the stock will rise again.
d) You do a sampling to confirm the client's accounts receivable to its customers, which are both modern and traditional retail home appliance stores. You do not confirm to all customers, but only do sampling. The sample is chosen using the monetary unit sampling method, where you choose based on customers who have a material amount. After the whole sample is confirmed, you find that there are some customers whose confirmed amounts are different, but the amount is immaterial. After use audit software to detect the unrecorded transaction, it found that it because there are unrecorded sales returns in small amount. The client acknowledged this and makes adjustments.
Questions
a. For each point number a) – d), identify each point as “fair” or “finding”. Provide your reason underline that answer!
b. For each point number a) – d), identify each point, type of audit objective and type of audit procedures. Provide your reason regarding audit objective and audit procedures you have chosen!

Answer 1

Answer:

a.

a, FAIR : Reason is that the auditor has performed confirmation of sales reports like receipts and so forth and discovered nothing that focuses towards any material errors. He has additionally looked for purchaser's affirmation which demonstrates that the sales transaction was certified.

b, FINDING : It is a discovering provided that an element has an out of date or obsolete stock, essential modifications should be done to represent the decrease in the estimation of such old stock.

c, FINDING : Because the organization has not accommodated hindrance or impairment misfortune in regard of its interest in securities, even if there should be an occurrence of critical decrease in the estimation or value of shares held by it.

d, FAIR : Because the sums where there are contrasts with the affirmed amounts of clients are little and not material. The customer has additionally acknowledged unrecorded sales returns, which are little in sum and as needs be made vital changes.

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b.

a, The audit objective is Occurrence trying as the auditor decides if the exchange has really occurred by checking sales archives and other supporting ones. The audit method utilized here is investigation since it incorporates checking or vouching of archives like assessment of sales records, receipts and so forth which are recorded in the books.

b, The audit objective is presence trying on the grounds that the auditor checks whether the stock that is demonstrated in the books of records really exist. The audit system utilized for this situation is physical stock check since it assists with ensuring that the real physical stock matches with those recorded in organization books.

c, The audit objective is valuation trying in light of the fact that the auditor decides the assets of the customer like speculation are appeared at the correct value in the books of records. The audit methodology utilized here is perception where he should investigate what the others are performing on a particular procedure. Here, he needs to consider the valuation report of a specialist corresponding to his customer's speculation or investment portfolio.

d, The audit objective is Rights and Obligations testing since it decides if an element really possesses all the benefits that it claims. The audit methodology utilized here is adjusts affirmation on the grounds that the audit has chosen an random example and based on such example, asked for balance affirmation from his customer's clients.