Explain the purpose of, and procedures for, obtaining written representations

(a) Explain the purpose of, and procedures for, obtaining written representations. (5 marks)
(b) The directors of a company have provided the external audit firm with an oral representation confirming that the
bank overdraft balances included within current liabilities are complete.
Required:
Describe the relevance and reliability of this oral representation as a source of evidence to confirm the
completeness of the bank overdraft balances. (3 marks)
(c) You are the audit manager of Violet & Co and you are currently reviewing the audit files for several of your clients
for which the audit fieldwork is complete. The audit seniors have raised the following issues:
Daisy Designs Co (Daisy)
Daisy’s year end is 30 September, however, subsequent to the year end the company’s sales ledger has been
corrupted by a computer virus. Daisy’s finance director was able to produce the financial statements prior to this
occurring; however, the audit team has been unable to access the sales ledger to undertake detailed testing of
revenue or year-end receivables. All other accounting records are unaffected and there are no backups available
for the sales ledger. Daisy’s revenue is $15·6m, its receivables are $3·4m and profit before tax is $2m.
Fuchsia Enterprises Co (Fuchsia)
Fuchsia has experienced difficult trading conditions and as a result it has lost significant market share. The cash
flow forecast has been reviewed during the audit fieldwork and it shows a significant net cash outflow.
Management are confident that further funding can be obtained and so have prepared the financial statements
on a going concern basis with no additional disclosures; the audit senior is highly sceptical about this. The prior
year financial statements showed a profit before tax of $1·2m; however, the current year loss before tax is $4·4m
and the forecast net cash outflow for the next 12 months is $3·2m.
Required:
For each of the two issues:
(i) Discuss the issue, including an assessment of whether it is material;
(ii) Recommend procedures the audit team should undertake at the completion stage to try to resolve the
issue; and
(iii) Describe the impact on the audit report if the issue remains unresolved.
Notes: 1 The total marks will be split equally between each issue.
2 Audit report extracts are NOT required. (12 marks)


 

PLACE THIS ORDER OR A SIMILAR ORDER WITH STUDENT HOMEWORKS TODAY AND GET AN AMAZING DISCOUNT

get-your-custom-paper

The post Explain the purpose of, and procedures for, obtaining written representations appeared first on STUDENT HOMEWORKS .

 
Do you need a similar assignment done for you from scratch? We have qualified writers to help you. We assure you an A+ quality paper that is free from plagiarism. Order now for an Amazing Discount!
Use Discount Code "Newclient" for a 15% Discount!

NB: We do not resell papers. Upon ordering, we do an original paper exclusively for you.

Buy Custom Nursing Papers