Case Study 2 – Auditing ACCT3000 (Semester 2, 2019)
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.
One of Technology Limited’s customers, Blue Chip Limited, is claiming that the latest batch of computer chips it received was found to be faulty. Blue Chip Limited is refusing to pay its account, which is allegedly seven months overdue. Technology Limited has claimed to have launched an investigation into the allegations, but as yet not been able to substantiate them. Technology Limited has suffered significant cash flow problems because another major customer, Creative Limited (Creative), is experiencing financial difficulties. As a result, Creative is taking well over 120 days to pay outstanding amounts, despite Creative’s terms of trade being payment within 30 days. Creative makes up 40 per cent of Technology Limited’s sales and the board has been reluctant to take any action that might adversely affect those sales. Consequently, Technology Limited has had to increase its dependency on its line of credit, and this has caused it to temporarily breach the debt to equity ratio required in its loan covenant with Big Bank Limited.
One of Technology Limited’s major suppliers went bankrupt one month ago, causing major product shortages. To overcome the problem, Peter James, the husband of the finance director, Natalie James, provided electronic components used in the production of computer chips to Technology Limited through his private company Norton Limited. Norton Limited demands payment in $US prior to the electronic components being supplied. There is no formal agreement in place with Peter James, however, the goods are being provided at competitive prices. You are concerned about the electronic components that Peter James’ company is supplying, because his products are new to the market and you have heard some of Technology Limited’s staff complaining that they are of poor quality.
Due to increased competitive pressure, Technology Limited has recently moved the manufacture of some of its computer chips to Bangladesh. Technology Limited saves around 25 per cent in costs compared to the equivalent Australian made items. However, the manufacturing process takes longer and on a few occasions late delivery from Bangladesh has resulted in lost sales.
Last month, a protester suffered a broken leg, allegedly because he was hit by a company truck. The protester is now suing Technology Limited for damages, claiming the contractor was in fact an employee of Technology Limited at the time of the accident, and was acting on Technology Limited’s instructions. Technology Limited is fighting the case and appears to have a reasonable chance of winning; however, the adverse publicity being generated is making the company nervous about its sales in the future.
During the period, the Australian dollar has remained steady against the Chinese Yuan, although it fell by about 3% against the US dollar. Debtors are invoiced in $US at the time of shipment, and payment is received in $US one month after the shipment is delivered. It takes around six weeks for the charter vessels to travel from Technology Limited’s shipyard at Bigmantle Bay to China. A recent downturn in the Chinese economy is affecting forward orders, which have fallen by 15%.
Required:
Prepare a memorandum to the audit manager, outlining your risk assessment relating to Technology
Limited. When making your risk assessment:
(a) Identify two (2) balance sheet accounts from the information provided that are subjected
to an increase in audit risk. Briefly explain what factors increase the audit risk associated
with the two (2) account balances identified. In your explanation, please mention the key
assertion(s) at risk of material misstatement and the components of the audit risk model
affected for each account balance identified.
(b) Identify how the audit plan will be affected and recommend specific audit procedures to
address the risks associated with each account balance identified.
(Please Note – Maximum Word Limit: 800 Words excluding references)

Assume that you are the president of your company and paid a year-end bonus according to the amount of net income earned during the year. When prices are rising, would you choose a FIFO or weighted average cost flow assumption? Explain, using an example to support your answer. Would your choice be the same if prices were falling?

Transactions and T Accounts

The following selected transactions were completed during March of the current year:

1. Billed customers for fees earned, $50,700.
2. Purchased supplies on account, $2,180.
3. Received cash from customers on account, $47,660.
4. Paid creditors on account, $1,320.

a. Journalize the transactions in a two-column journal, using the appropriate number to identify the transactions.

b. Post the entries prepared in (a) to the following T accounts: Cash, Supplies, Accounts Receivable, Accounts Payable, Fees Earned. To the left of each amount posted in the accounts, select the appropriate number to identify the transactions.

c. Assume that the unadjusted trial balance on March 31 shows a credit balance for Accounts Receivable. Does this credit balance mean an error has occurred?

A firm’s production function is given by q = 40 ln(EW + EB + 1) where EW and EB are the number of whites and blacks employed by the firm, respectively. From this it can be shown that the marginal product of labor is MPE = 40 / (EW + EB + 1). Suppose the market wage for blacks is $50, the market wage for whites is $100, and the price of each unit of output is $20.

(a) How many workers of each race would a non-discriminating firm hire? How much profit is earned if there are no other costs?

(b) How many workers of each race would a firm with a discrimination coefficient of 0.6 against black workers hire? How much profit is earned if there are no other costs?

(c) How many workers of each race would a firm with a discrimination coefficient of 1.2 against black workers hire? How much profit is earned if there are no other costs?

Generate a Punnett square for a heterozygous individual crossed with a heterozygous individual. Make the mutation recessive. What percentage of the offspring contain the mutation?

This week, we are going to discuss individual rights by doing the following:

1. Select an individual healthcare related right from Chapter 6 of our e-text such as EMTALA, Women in Labor Act, Roe v. Wade, access to health insurance (the ACA), access to reproductive rights such as birth control and abortion. I selected Women In Labor Act
2. Describe the right briefly and then discuss if there are any attempts to curtail (reduce) or eliminate (erase) these rights. You can use the cases described in the e-text in this chapter or cases you find in Westlaw or on the World Wide Web. Describe any opposition to the efforts to reduce or eliminate these currently available individual rights to health care services and access.

Should we protect the individual or let the individual find their own solution?why?

How does a group influence the behavior of the individual? How does an individual counter the influence of the group? write at least 250 words