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Find Related Questions by Tags, levels, etc.
Eat Well Bakeries is a private limited liability company. It bakes bread and other confectioneries, produced from the main bakery and a smaller bakery in another part of town. Products are sold from these two bakeries and five additional outlets in the same town. Distributors purchase products outright and bear the risk of sale.
The main administrative and management functions of the bakeries are conducted from the main bakery, while basic records are kept at the small bakery and sales outlets. These records are transmitted to the main office every morning. Detailed accounting records and performance analysis are handled in the main administrative office.
Despite being a private business, the chairman insists on maintaining proper standards to stay competitive. The chairman transferred the company’s audit to your firm after a discussion with your partner, and professional clearance was obtained. However, limited documentation from the predecessor auditor was available, and no extensive documentation was done at the beginning of the audit.
You have been assigned to continue the audit from where it was left off, ensuring the chairman’s expectations are met.
Required:
a. Evaluate the Auditor’s objective concerning ISA 250 that would be discussed with the chairman. (5 Marks)
b. Prepare an outline of matters that should be communicated. (5 Marks)
c. Your review shows internal control challenges. Based on this, prepare a brief on:
d. Evaluate potential audit strategies, and recommend an appropriate model for application to Eat Well Bakeries. (12 Marks)
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The statement below is an extract of property, plant and equipment from the “notes to the financial statements” of ABC Plc:
| Land and buildings | Plant, equipment, fixtures and fittings, and motor vehicles | Total | |
|---|---|---|---|
| Costs (₦) | |||
| At January 1, 2020 | 75,230,481 | 120,454,850 | 195,685,331 |
| Additions | 12,540,000 | 16,000,500 | 28,540,500 |
| Acquisitions through business combinations | 24,400,000 | 35,750,430 | 60,150,430 |
| Classified as held for sale | (10,200,450) | (15,450,600) | (25,651,050) |
| Disposals | (5,000,465) | (10,700,250) | (15,700,715) |
| At December 31, 2020 | 96,969,566 | 146,054,930 | 243,024,496 |
| Accumulated depreciation and impairment losses | |||
| At January 1, 2020 | 46,660,254 | 66,675,860 | 113,336,114 |
| Depreciation charge for the year | 5,594,523 | 17,220,518 | 22,815,041 |
| Classified as held for sale | (7,650,338) | (9,270,000) | (16,920,338) |
| Disposals | (3,762,523) | (9,034,069) | (12,796,592) |
| Impairment losses | 5,267,533 | 6,022,713 | 11,290,246 |
| Reversal of Impairment losses | (4,515,028) | (4,818,170) | (9,333,198) |
| At December 31, 2020 | 41,594,421 | 66,796,852 | 108,391,273 |
Net carrying amount
At December 31, 2020: ₦55,375,145 (Land and buildings), ₦79,258,078 (Plant, equipment, fixtures, and fittings, and motor vehicles), Total: ₦134,633,223
At December 31, 2019: ₦28,590,212 (Land and buildings), ₦53,778,390 (Plant, equipment, fixtures, and fittings, and motor vehicles), Total: ₦82,368,602
The above was the situation of the statement of financial position of the company when it was signed at the board of directors meeting. During further review to sign off the audit file, it was discovered that the classification of some of the assets as impaired was due to wrong classification and the value had actually increased due to a new road network in the location. This affected the impairment losses for the year. The new value of the buildings affected and shown in the note above as available from market survey had actually grown to ₦8.5 million within the period under review.
Required:
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
Eat Well Bakeries is a private limited liability company. It bakes bread and other confectioneries, produced from the main bakery and a smaller bakery in another part of town. Products are sold from these two bakeries and five additional outlets in the same town. Distributors purchase products outright and bear the risk of sale.
The main administrative and management functions of the bakeries are conducted from the main bakery, while basic records are kept at the small bakery and sales outlets. These records are transmitted to the main office every morning. Detailed accounting records and performance analysis are handled in the main administrative office.
Despite being a private business, the chairman insists on maintaining proper standards to stay competitive. The chairman transferred the company’s audit to your firm after a discussion with your partner, and professional clearance was obtained. However, limited documentation from the predecessor auditor was available, and no extensive documentation was done at the beginning of the audit.
You have been assigned to continue the audit from where it was left off, ensuring the chairman’s expectations are met.
Required:
a. Evaluate the Auditor’s objective concerning ISA 250 that would be discussed with the chairman. (5 Marks)
b. Prepare an outline of matters that should be communicated. (5 Marks)
c. Your review shows internal control challenges. Based on this, prepare a brief on:
d. Evaluate potential audit strategies, and recommend an appropriate model for application to Eat Well Bakeries. (12 Marks)
Find Related Questions by Tags, levels, etc.
The statement below is an extract of property, plant and equipment from the “notes to the financial statements” of ABC Plc:
| Land and buildings | Plant, equipment, fixtures and fittings, and motor vehicles | Total | |
|---|---|---|---|
| Costs (₦) | |||
| At January 1, 2020 | 75,230,481 | 120,454,850 | 195,685,331 |
| Additions | 12,540,000 | 16,000,500 | 28,540,500 |
| Acquisitions through business combinations | 24,400,000 | 35,750,430 | 60,150,430 |
| Classified as held for sale | (10,200,450) | (15,450,600) | (25,651,050) |
| Disposals | (5,000,465) | (10,700,250) | (15,700,715) |
| At December 31, 2020 | 96,969,566 | 146,054,930 | 243,024,496 |
| Accumulated depreciation and impairment losses | |||
| At January 1, 2020 | 46,660,254 | 66,675,860 | 113,336,114 |
| Depreciation charge for the year | 5,594,523 | 17,220,518 | 22,815,041 |
| Classified as held for sale | (7,650,338) | (9,270,000) | (16,920,338) |
| Disposals | (3,762,523) | (9,034,069) | (12,796,592) |
| Impairment losses | 5,267,533 | 6,022,713 | 11,290,246 |
| Reversal of Impairment losses | (4,515,028) | (4,818,170) | (9,333,198) |
| At December 31, 2020 | 41,594,421 | 66,796,852 | 108,391,273 |
Net carrying amount
At December 31, 2020: ₦55,375,145 (Land and buildings), ₦79,258,078 (Plant, equipment, fixtures, and fittings, and motor vehicles), Total: ₦134,633,223
At December 31, 2019: ₦28,590,212 (Land and buildings), ₦53,778,390 (Plant, equipment, fixtures, and fittings, and motor vehicles), Total: ₦82,368,602
The above was the situation of the statement of financial position of the company when it was signed at the board of directors meeting. During further review to sign off the audit file, it was discovered that the classification of some of the assets as impaired was due to wrong classification and the value had actually increased due to a new road network in the location. This affected the impairment losses for the year. The new value of the buildings affected and shown in the note above as available from market survey had actually grown to ₦8.5 million within the period under review.
Required:
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