Question Tag: Subsequent Events

Search 500 + past questions and counting.

  • Filter by Professional Bodies

  • Filter by Subject

  • Filter by Series

  • Filter by Topics

  • Filter by Levels

  • 20 Marks

AAA – Nov 2014 – L3 – SB – Q3 – Review of Subsequent Events and Going Concern Assumptions

Identify going concern risks for Woes Limited and outline post-reporting date audit matters to assess its ability to continue as a going concern.

You are responsible for the audit of Woes Limited for the year-ended 31 December 2013. The principal activity of Woes Ltd is the provision of high-quality packaging services for manufacturing companies. The company was established three years ago and has significantly exceeded its growth targets in each of those years.

Historically, the packaging process was labour-intensive, but in September 2013, in an effort to reduce labour costs and increase efficiency, the company invested in an enhanced automated packing system. The investment was funded by a loan repayable in monthly instalments over four years. The loan covenant agreement includes a term specifying that the company’s debt: equity ratio should not exceed 1:1.

A comparison of the draft accounts for the year ended 31 December 2013 with the previous year indicates a significant increase in revenue with a small increase in profit. The company is currently trading in excess of its overdraft limit and is negotiating an increase in its facility with the bank. Management has prepared, in support of its negotiations, profit and cash flow forecasts based on the assumptions that the anticipated increase in efficiency, including a reduction in labour costs, will be achieved.

The company struggles to meet the weekly wage bill and has fallen behind in its payments to the tax authorities. It has also failed to comply with the terms of the lease in respect of the factory premises and has not paid the last three months’ instalments.

Required:

a. Identify and explain, from the information provided above, factors which indicate that Woes Ltd may not be a going concern. (10 Marks)
b. Outline the matters to which you would direct your attention in the period after the reporting date to determine whether Woes Ltd can continue as a going concern for the foreseeable future. (10 Marks)

(Total: 20 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Nov 2014 – L3 – SB – Q3 – Review of Subsequent Events and Going Concern Assumptions"

  • 15 Marks

AAA – Nov 2013 – L3 – SB – Q5 – Review of Subsequent Events and Going Concern Assumptions

Outline audit procedures to identify material subsequent events and explain the purpose and importance of subsequent events review.

You have just concluded the audit of Roico Limited for the year ended 31 December, 2012. During the review of the working paper file, the partner in charge discovered that no information is available on activities after year-end. The partner instructed the team leader to carry out a review of the company’s activities after year-end. The team leader was not comfortable with the instruction and wants to know why it is necessary to examine accounting information relating to the next accounting period.

You are required to:

(a) Enumerate the audit procedures which would be carried out in order to identify any material subsequent events. (10 Marks)

(b) Discuss the purpose and importance of subsequent events review. (5 Marks)

(Total: 15 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Nov 2013 – L3 – SB – Q5 – Review of Subsequent Events and Going Concern Assumptions"

  • 20 Marks

AAA – Nov 2021 – L3 – Q4 – Audit Completion and Final Review

Discuss auditor responsibilities for detecting misstatements in different reporting periods and associated audit procedures.

Your firm is the auditor of Sharp Electronics Co. Plc, a listed company, which assembles electronic home appliances for sale on retail and wholesale bases. The electronic appliances parts are purchased from within and outside the country. The extract from the statement of financial position of the company is as follows:

Sharp Electronics Co. Plc – Statement of Financial Position

You have been asked by the partner in charge of the audit to consider your firm’s audit responsibilities with respect to subsequent events, and the associated audit procedures for such matters.

Required:

a. Discuss the responsibilities of the auditors for detecting misstatements in the financial statements during the following periods:

i. From the end of the reporting period up to the date of the audit report. (8 Marks)

ii. After the date of the audit report and before financial statements are issued. (6 Marks)

iii. After the financial statements have been issued. (3 Marks)

b. State the details of the work you will carry out in period (a)(ii) above to identify significant subsequent events affecting the financial statements. (5 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Nov 2021 – L3 – Q4 – Audit Completion and Final Review"

  • 10 Marks

AA – Nov 2019 – L2 – Q4a – Completion Procedures and Reporting

Classifies subsequent events and indicates the required treatment in financial statements.

During the audit of Die Hard Company Limited, the following items were listed on the file divider under subsequent events:
i) Kodjo Armah, a major debtor for GH¢400,000 has been found to be insolvent.
ii) Large quantities of stocks were destroyed by fire in the first month after the reporting date.
iii) Judgment in respect of litigation that was ongoing before the year-end has been given against the company shortly after the end of the financial year. The judgment debt was GH¢5 million.
iv) Two customers had put in a claim in respect of goods sold to them under warranty before the year-end of GH¢300,000 and GH¢450,000 respectively. No provision was made for warranty claims in the financial statements.
v) The company issued fresh equity shares after the year-end. The number of shares was 2.5 million which generated GH¢5 million.

Required:
Classify the above items and indicate the treatment required in the financial statements.
(10 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – Nov 2019 – L2 – Q4a – Completion Procedures and Reporting"

  • 10 Marks

AA – Mar 2023 – L2 – Q4a – Completion Procedures and Reporting

Explain the auditor's responsibilities regarding subsequent events and how a legal claim should be reported in financial statements.

You are an audit assistant for an audit client with a year-end of 31 December 2021. A major customer has instituted a legal action against the company for faulty goods supplied after the year-end. A recently recruited intern who was part of your team was of the opinion that because of the cut-off assertion, any event after 31 December 2021 should not affect the financial statements and therefore the auditor should have no responsibility for issues occurring after the reporting year.

Following your audit of the client, you have concluded that there is a possibility, but not a probability, that the claim will be successful. However, management has decided not to make a provision or disclosure in the financial statements for this matter.

Required:
In reference to the preamble:
i) Describe the auditor’s responsibility for subsequent events occurring between:

  • The year-end date and the date the auditor’s report is signed; and
  • The date the auditor’s report is signed and the date the financial statements are issued. (6 marks)

ii) Explain how the matter should be reported in the financial statements. (4 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – Mar 2023 – L2 – Q4a – Completion Procedures and Reporting"

  • 7 Marks

AA – Nov 2015 – L2 – Q2c – Audit and Assurance Risk Environment, Completion Procedures and Reporting

This question covers auditors’ responsibilities for subsequent events and going concern assessments, as well as internal control reporting.

c) Technolab has an internal audit department. The partner in charge of the audit is seeking clarification regarding how any deficiencies in internal control should be identified and communicated to management. The partner feels the report produced by the external auditors may duplicate the report produced by the internal audit function.

Required:
Explain how the purpose and content of an internal auditor’s report on internal control deficiencies differ from one prepared by the external auditor.
(7 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – Nov 2015 – L2 – Q2c – Audit and Assurance Risk Environment, Completion Procedures and Reporting"

  • 14 Marks

AA – Nov 2015 – L2 – Q2a and b – Audit and Assurance Risk Environment, Completion Procedures and Reporting

This question covers auditors’ responsibilities for subsequent events and going concern assessments, as well as internal control reporting.

You are an audit senior for an audit firm and are currently working on the audit of Technolab, a company that produces sophisticated electronic laboratory equipment. The company imports a high proportion of the components it uses from China. The equipment is used by some laboratories dealing with hazardous chemicals.

As the audit draws to a close, the partner in charge has asked you to ensure that all procedures relating to subsequent events and going concern are properly performed. You are to consider the audit work to be performed in relation to ISA 560 Subsequent Events and ISA 570 Going Concern.

Required:

a) Describe the auditor’s responsibilities for subsequent events occurring between:
i. The year-end date and the date the auditor’s report is signed.
ii. The date the auditor’s report is signed and the date the financial statements are issued.
(6 marks)

b) Going concern relates to the judgment that an entity will continue to trade for the foreseeable future.
i. Explain the responsibilities of directors and auditors in relation to going concern.
(3 marks)
ii. Explain the audit procedures that the auditor could carry out when conducting the going concern review of Technolab.
(4 marks)

c) Technolab has an internal audit department. The partner in charge of the audit is seeking clarification regarding how any deficiencies in internal control should be identified and communicated to management. The partner feels the report produced by the external auditors may duplicate the report produced by the internal audit function.

Required:
Explain how the purpose and content of an internal auditor’s report on internal control deficiencies differ from one prepared by the external auditor.
(7 marks)

Total: 20 marks

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – Nov 2015 – L2 – Q2a and b – Audit and Assurance Risk Environment, Completion Procedures and Reporting"

  • 10 Marks

AA – May 2021 – L2 – Q4a and b – Completion Procedures and Reporting

Discuss whether the financial statements require amendment and audit procedures to conclude on the amendment.

Fafa Ltd operates a chain of food wholesalers across the Volta Region of Ghana, and its year-end was 30 September, 2019. The final audit is nearly complete, and it is proposed that the financial statements and audit report will be signed on 13 December, 2019. Revenue for the year is GHS 79 million, and profit before taxation is GHS 8.5 million. The following event occurred after the year-end.

Receivable:
A customer of Fafa Ltd has been experiencing cash flow problems, and its year-end balance is GHS 0.8 million. The company has just become aware that its customer is experiencing significant going concern difficulties. Fafa Ltd believes that as the company has been trading for many years, they will receive some, if not full, payment from the customer, hence they have not adjusted the receivable balance.

Required:
i) Discuss whether the financial statements require amendment. (1 mark)

ii) Describe THREE (3) audit procedures that should be performed to form a conclusion on the amendment.

(3 marks)

b) Describe management’s responsibility for subsequent events occurring between:
i) The year-end date and the date the Auditor’s report is signed. (3 marks)
ii) The date the Auditor’s report is signed and the date the financial statements are issued. (3 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – May 2021 – L2 – Q4a and b – Completion Procedures and Reporting"

  • 10 Marks

AA – May 2018 – L2 – Q3b – Audit and Assurance Risk Environment, Completion Procedures and Reporting

Explains the importance of professional skepticism and audit procedures for subsequent events in the audit process.

ii) Auditors are required to plan and perform an audit with professional skepticism, to exercise professional judgment, and to comply with ethical standards.

Required:
Explain what is meant by ‘professional skepticism’ and why it is so important that the auditor maintains professional skepticism throughout the audit. (5 marks)

b)
i) International Standard on Auditing (ISA) 560: Subsequent Events deals with the auditor’s responsibility towards events that occur after the reporting date and especially before the auditor’s report is issued.

Required:
Explain FIVE audit procedures to test subsequent events. (5 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – May 2018 – L2 – Q3b – Audit and Assurance Risk Environment, Completion Procedures and Reporting"

  • 10 Marks

AA – April 2022 – L2 – Q4a – Completion Procedures and Reporting

Discusses the need to amend financial statements based on subsequent events and the auditor's responsibility in the post-year-end period.

a) Aseye Ltd is in the manufacturing sector and its year-end is 30 September 2019. The final audit is nearly complete and it is proposed that the financial statements and audit report will be signed on 10 November 2019. Revenue for the year is GH¢80 million and profit before taxation is GH¢9 million. Subsequent to the year-end, a lawsuit was filed against Aseye Ltd. Below are the details of the lawsuit:

A key supplier of Aseye Ltd is suing the company for breach of contract. The lawsuit was filed on 10 October 2019, and the sum claimed by the supplier is GH¢2 million. This has been disclosed as a contingent liability in the notes to the financial statements; however, correspondence has just been received from the supplier indicating that they are willing to settle the case for a payment by Aseye Ltd of GH¢1 million. It is likely that the company will agree to this.

Required:
i) For the event above:

  • Discuss whether the financial statements require amendment. (2 marks)
  • Describe audit procedures that should be performed to enable the Auditor to draw a conclusion on the amendment. (2 marks)

ii) Describe the auditor’s responsibility for subsequent events occurring between:

  • The year-end date and the date the auditor’s report is signed. (3 marks)
  • The date the auditor’s report is signed and the date the financial statements are issued. (3 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – April 2022 – L2 – Q4a – Completion Procedures and Reporting"

  • 20 Marks

AAA – Nov 2014 – L3 – SB – Q3 – Review of Subsequent Events and Going Concern Assumptions

Identify going concern risks for Woes Limited and outline post-reporting date audit matters to assess its ability to continue as a going concern.

You are responsible for the audit of Woes Limited for the year-ended 31 December 2013. The principal activity of Woes Ltd is the provision of high-quality packaging services for manufacturing companies. The company was established three years ago and has significantly exceeded its growth targets in each of those years.

Historically, the packaging process was labour-intensive, but in September 2013, in an effort to reduce labour costs and increase efficiency, the company invested in an enhanced automated packing system. The investment was funded by a loan repayable in monthly instalments over four years. The loan covenant agreement includes a term specifying that the company’s debt: equity ratio should not exceed 1:1.

A comparison of the draft accounts for the year ended 31 December 2013 with the previous year indicates a significant increase in revenue with a small increase in profit. The company is currently trading in excess of its overdraft limit and is negotiating an increase in its facility with the bank. Management has prepared, in support of its negotiations, profit and cash flow forecasts based on the assumptions that the anticipated increase in efficiency, including a reduction in labour costs, will be achieved.

The company struggles to meet the weekly wage bill and has fallen behind in its payments to the tax authorities. It has also failed to comply with the terms of the lease in respect of the factory premises and has not paid the last three months’ instalments.

Required:

a. Identify and explain, from the information provided above, factors which indicate that Woes Ltd may not be a going concern. (10 Marks)
b. Outline the matters to which you would direct your attention in the period after the reporting date to determine whether Woes Ltd can continue as a going concern for the foreseeable future. (10 Marks)

(Total: 20 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Nov 2014 – L3 – SB – Q3 – Review of Subsequent Events and Going Concern Assumptions"

  • 15 Marks

AAA – Nov 2013 – L3 – SB – Q5 – Review of Subsequent Events and Going Concern Assumptions

Outline audit procedures to identify material subsequent events and explain the purpose and importance of subsequent events review.

You have just concluded the audit of Roico Limited for the year ended 31 December, 2012. During the review of the working paper file, the partner in charge discovered that no information is available on activities after year-end. The partner instructed the team leader to carry out a review of the company’s activities after year-end. The team leader was not comfortable with the instruction and wants to know why it is necessary to examine accounting information relating to the next accounting period.

You are required to:

(a) Enumerate the audit procedures which would be carried out in order to identify any material subsequent events. (10 Marks)

(b) Discuss the purpose and importance of subsequent events review. (5 Marks)

(Total: 15 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Nov 2013 – L3 – SB – Q5 – Review of Subsequent Events and Going Concern Assumptions"

  • 20 Marks

AAA – Nov 2021 – L3 – Q4 – Audit Completion and Final Review

Discuss auditor responsibilities for detecting misstatements in different reporting periods and associated audit procedures.

Your firm is the auditor of Sharp Electronics Co. Plc, a listed company, which assembles electronic home appliances for sale on retail and wholesale bases. The electronic appliances parts are purchased from within and outside the country. The extract from the statement of financial position of the company is as follows:

Sharp Electronics Co. Plc – Statement of Financial Position

You have been asked by the partner in charge of the audit to consider your firm’s audit responsibilities with respect to subsequent events, and the associated audit procedures for such matters.

Required:

a. Discuss the responsibilities of the auditors for detecting misstatements in the financial statements during the following periods:

i. From the end of the reporting period up to the date of the audit report. (8 Marks)

ii. After the date of the audit report and before financial statements are issued. (6 Marks)

iii. After the financial statements have been issued. (3 Marks)

b. State the details of the work you will carry out in period (a)(ii) above to identify significant subsequent events affecting the financial statements. (5 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Nov 2021 – L3 – Q4 – Audit Completion and Final Review"

  • 10 Marks

AA – Nov 2019 – L2 – Q4a – Completion Procedures and Reporting

Classifies subsequent events and indicates the required treatment in financial statements.

During the audit of Die Hard Company Limited, the following items were listed on the file divider under subsequent events:
i) Kodjo Armah, a major debtor for GH¢400,000 has been found to be insolvent.
ii) Large quantities of stocks were destroyed by fire in the first month after the reporting date.
iii) Judgment in respect of litigation that was ongoing before the year-end has been given against the company shortly after the end of the financial year. The judgment debt was GH¢5 million.
iv) Two customers had put in a claim in respect of goods sold to them under warranty before the year-end of GH¢300,000 and GH¢450,000 respectively. No provision was made for warranty claims in the financial statements.
v) The company issued fresh equity shares after the year-end. The number of shares was 2.5 million which generated GH¢5 million.

Required:
Classify the above items and indicate the treatment required in the financial statements.
(10 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – Nov 2019 – L2 – Q4a – Completion Procedures and Reporting"

  • 10 Marks

AA – Mar 2023 – L2 – Q4a – Completion Procedures and Reporting

Explain the auditor's responsibilities regarding subsequent events and how a legal claim should be reported in financial statements.

You are an audit assistant for an audit client with a year-end of 31 December 2021. A major customer has instituted a legal action against the company for faulty goods supplied after the year-end. A recently recruited intern who was part of your team was of the opinion that because of the cut-off assertion, any event after 31 December 2021 should not affect the financial statements and therefore the auditor should have no responsibility for issues occurring after the reporting year.

Following your audit of the client, you have concluded that there is a possibility, but not a probability, that the claim will be successful. However, management has decided not to make a provision or disclosure in the financial statements for this matter.

Required:
In reference to the preamble:
i) Describe the auditor’s responsibility for subsequent events occurring between:

  • The year-end date and the date the auditor’s report is signed; and
  • The date the auditor’s report is signed and the date the financial statements are issued. (6 marks)

ii) Explain how the matter should be reported in the financial statements. (4 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – Mar 2023 – L2 – Q4a – Completion Procedures and Reporting"

  • 7 Marks

AA – Nov 2015 – L2 – Q2c – Audit and Assurance Risk Environment, Completion Procedures and Reporting

This question covers auditors’ responsibilities for subsequent events and going concern assessments, as well as internal control reporting.

c) Technolab has an internal audit department. The partner in charge of the audit is seeking clarification regarding how any deficiencies in internal control should be identified and communicated to management. The partner feels the report produced by the external auditors may duplicate the report produced by the internal audit function.

Required:
Explain how the purpose and content of an internal auditor’s report on internal control deficiencies differ from one prepared by the external auditor.
(7 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – Nov 2015 – L2 – Q2c – Audit and Assurance Risk Environment, Completion Procedures and Reporting"

  • 14 Marks

AA – Nov 2015 – L2 – Q2a and b – Audit and Assurance Risk Environment, Completion Procedures and Reporting

This question covers auditors’ responsibilities for subsequent events and going concern assessments, as well as internal control reporting.

You are an audit senior for an audit firm and are currently working on the audit of Technolab, a company that produces sophisticated electronic laboratory equipment. The company imports a high proportion of the components it uses from China. The equipment is used by some laboratories dealing with hazardous chemicals.

As the audit draws to a close, the partner in charge has asked you to ensure that all procedures relating to subsequent events and going concern are properly performed. You are to consider the audit work to be performed in relation to ISA 560 Subsequent Events and ISA 570 Going Concern.

Required:

a) Describe the auditor’s responsibilities for subsequent events occurring between:
i. The year-end date and the date the auditor’s report is signed.
ii. The date the auditor’s report is signed and the date the financial statements are issued.
(6 marks)

b) Going concern relates to the judgment that an entity will continue to trade for the foreseeable future.
i. Explain the responsibilities of directors and auditors in relation to going concern.
(3 marks)
ii. Explain the audit procedures that the auditor could carry out when conducting the going concern review of Technolab.
(4 marks)

c) Technolab has an internal audit department. The partner in charge of the audit is seeking clarification regarding how any deficiencies in internal control should be identified and communicated to management. The partner feels the report produced by the external auditors may duplicate the report produced by the internal audit function.

Required:
Explain how the purpose and content of an internal auditor’s report on internal control deficiencies differ from one prepared by the external auditor.
(7 marks)

Total: 20 marks

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – Nov 2015 – L2 – Q2a and b – Audit and Assurance Risk Environment, Completion Procedures and Reporting"

  • 10 Marks

AA – May 2021 – L2 – Q4a and b – Completion Procedures and Reporting

Discuss whether the financial statements require amendment and audit procedures to conclude on the amendment.

Fafa Ltd operates a chain of food wholesalers across the Volta Region of Ghana, and its year-end was 30 September, 2019. The final audit is nearly complete, and it is proposed that the financial statements and audit report will be signed on 13 December, 2019. Revenue for the year is GHS 79 million, and profit before taxation is GHS 8.5 million. The following event occurred after the year-end.

Receivable:
A customer of Fafa Ltd has been experiencing cash flow problems, and its year-end balance is GHS 0.8 million. The company has just become aware that its customer is experiencing significant going concern difficulties. Fafa Ltd believes that as the company has been trading for many years, they will receive some, if not full, payment from the customer, hence they have not adjusted the receivable balance.

Required:
i) Discuss whether the financial statements require amendment. (1 mark)

ii) Describe THREE (3) audit procedures that should be performed to form a conclusion on the amendment.

(3 marks)

b) Describe management’s responsibility for subsequent events occurring between:
i) The year-end date and the date the Auditor’s report is signed. (3 marks)
ii) The date the Auditor’s report is signed and the date the financial statements are issued. (3 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – May 2021 – L2 – Q4a and b – Completion Procedures and Reporting"

  • 10 Marks

AA – May 2018 – L2 – Q3b – Audit and Assurance Risk Environment, Completion Procedures and Reporting

Explains the importance of professional skepticism and audit procedures for subsequent events in the audit process.

ii) Auditors are required to plan and perform an audit with professional skepticism, to exercise professional judgment, and to comply with ethical standards.

Required:
Explain what is meant by ‘professional skepticism’ and why it is so important that the auditor maintains professional skepticism throughout the audit. (5 marks)

b)
i) International Standard on Auditing (ISA) 560: Subsequent Events deals with the auditor’s responsibility towards events that occur after the reporting date and especially before the auditor’s report is issued.

Required:
Explain FIVE audit procedures to test subsequent events. (5 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – May 2018 – L2 – Q3b – Audit and Assurance Risk Environment, Completion Procedures and Reporting"

  • 10 Marks

AA – April 2022 – L2 – Q4a – Completion Procedures and Reporting

Discusses the need to amend financial statements based on subsequent events and the auditor's responsibility in the post-year-end period.

a) Aseye Ltd is in the manufacturing sector and its year-end is 30 September 2019. The final audit is nearly complete and it is proposed that the financial statements and audit report will be signed on 10 November 2019. Revenue for the year is GH¢80 million and profit before taxation is GH¢9 million. Subsequent to the year-end, a lawsuit was filed against Aseye Ltd. Below are the details of the lawsuit:

A key supplier of Aseye Ltd is suing the company for breach of contract. The lawsuit was filed on 10 October 2019, and the sum claimed by the supplier is GH¢2 million. This has been disclosed as a contingent liability in the notes to the financial statements; however, correspondence has just been received from the supplier indicating that they are willing to settle the case for a payment by Aseye Ltd of GH¢1 million. It is likely that the company will agree to this.

Required:
i) For the event above:

  • Discuss whether the financial statements require amendment. (2 marks)
  • Describe audit procedures that should be performed to enable the Auditor to draw a conclusion on the amendment. (2 marks)

ii) Describe the auditor’s responsibility for subsequent events occurring between:

  • The year-end date and the date the auditor’s report is signed. (3 marks)
  • The date the auditor’s report is signed and the date the financial statements are issued. (3 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AA – April 2022 – L2 – Q4a – Completion Procedures and Reporting"

Elevate your professional expertise across key business domains with our comprehensive training programs

Our offerings

Contact Info

  • +233203701923
    +233543919232
  • info@knowsia.com

Customer

Get In Touch

Follow us on our social media and get daily updates.

Facebook-f Twitter Linkedin-in Envelope
Oops!

This feature is only available in selected plans.

Click here to view all plans

Click on the login button below to login if you’re already subscribed to a plan or click on the upgrade button below to upgrade your current plan.

Login
Upgrade Plan

If you’re not subscribed to a plan, click on the button below to choose a plan

Subscribe to a plan