Question 5b
Marking Guide
up to 1 mark per valid point, overall maximum of 5 marks per event. | |
| receivable | |
| provides evidence of conditions at the year end | |
| receivable to be adjusted via write down or allowance | |
| review correspondence with customer | |
| discuss with management | |
| review post year-end period for cash receipts | |
| calculation of materiality | |
| no audit report modification required | 5 |
| lawsuit | |
| provides evidence of present obligation at the year end | |
| provision required and not contingent liability disclosures | |
| discuss with company lawyer | |
| review correspondence with supplier | |
| discuss with management and obtain written representation | |
| calculation of materiality | |
| type of audit report modification required | |
| impact on audit report | 5 |
| warehouse | |
| provides evidence of conditions that arose subsequent to the year end | |
| no adjustment required, possible disclosure of any uninsured sums | |
| discuss with management whether sufficient levels of inventory to continue operating | |
| obtain written representation that going concern status appropriate | |
| obtain schedule of damaged inventory and review reasonableness | |
| review correspondence with insurance firm to assess levels of uninsured goods | |
| calculation of materiality | |
| type of audit report modification required | |
| impact on audit report | 5 |
| max marks | 15 |