(ii) Evidence
Generally 1 mark for a well explained audit evidence point:
– A copy of the contract between Kowloon Co and BMC reviewed for terms, in particular on whether the cancellation of the contract triggers a repayment of the payment in advance and in relation to ownership of the rights to the development which has so far taken place
– Copies of correspondence between Kowloon and Co and BMC reviewed for implications of the cancellation of the contract
– Written confirmation from BMC that the contract has been cancelled and the date of the cancellation
– Written representation from the project manager confirming that BMC contacted him regarding their financial difficulties in December 2015
– Notes of a discussion with the project manager to confirm if the work in progress could be used for an different contract or the feasibility of the design work leading to a new type of product which could be produced by Kowloon Co
– Correspondence with legal counsel regarding legal implications of selling to alternative customer
– Review of orders/board minutes to identify if course of action has been determined and alternative customer identified
– Extracts from the financial statements and journals to confirm that the necessary adjustments have been made
– A copy of the integrated report, reviewed to confirm whether the cancellation of the contract has
been discussed
Maximum marks 5