Professional Documents
Culture Documents
ACCT410 Section 3
group financial statement would not be correct or they have to calculate proportionally or make disclosure. Also, we have to discuss with the auditor of Socolla whether they would work as the groups auditors and if they provide adequate work for the groups financial statement. We should send a letter to request for cooperation with Socollas auditors. Then, they have to discuss the adequacy of audit work, the audit procedures and the timetable of the group audit works so that they can follow. Last but not least, we should discuss with the component management that the authority and responsibility of the auditors and the component management responsibility. We should inform
1
ACCT410 Section 3
them what they should provide when we prepare the group audit work. may monitor and assess the companys control system and its IT system.
system may be ineffective to identify and assess the transactions and balances that was outstanding. Also, the related party transaction cannot be recognised easily since it is not stay in the normal market terms and condition. Some of them even without the exchange of
considerations. Moreover, since the related parties want to keep on operation in a going concern way. They would present their status in a favourable way, therefore, it increases the difficulties for detecting such related parties transactions. b. To identify the related parties transactions, we would suggest some audit procedures. The auditors can practice test of details with the balances and transactions. check if the transactions are being recorded correctly. The auditors can also check the minutes of the board of directors or the shareholders. Also, auditors should review the large balances, for example, the large outstanding balances or the balances outstanding for a long time. They should also review the unusual items to check if they have relationships with the related parties. To add more, they can check the confirmations from the banks. So that they can match with the company record and check whether it incur error or fraud or not. c. The company should ask the Sales Director if he does not have any related parties with the companys business. The Sales Director should report the conflicts of interests. So that they can
The company should check the company thoroughly and the sales record to check if there are
2
ACCT410 Section 3
any related parties transactions with the Coutier Limited. Also, the company should strengthen their internal control to increase the awareness of the related parties transactions. The company should set up some rules and regulations to enforce the directors who are important and have large delegation of the company to report their conflicts of interests to the company. The company should also check the item and terms in the contract with Coutier Limited to check whether it is unfair with the other companies. If there are some unfair items on the
contract, the auditors should discuss with the management to see whether it is appropriate. The auditors should request written representations from the management level of the company, Chao & Co. to show that the management level have provide adequate information, relationships and transactions, with the requirement of regulatory framework. Also, they
should make sure that they have disclose the identification of related parties to the auditors.
ACCT410 Section 3
ACCT410 Section 3
and check whether it is correct or not especially the financial reports would announce publicly which will affect the intention of the investors. Besides, for the on-going monitoring activities of the completeness of acquisition of merchandise from suppliers, we can find that the amount of trade and bills payable increased more than HK$100 million. Since we keep on monitoring on the activities of suppliers, we
can just practice test of totality which sum up the single accounts with the books.
ACCT410 Section 3
Also, they
So they can check the possibility of error and fraud when practicing the
ACCT410 Section 3
sales with the receipts placed in the outlets. Also, they can ask the supervisor to keep the cash balance remain less the routine expense of outlets. Last but not least, they should perform a surprise visits to the outlets and practice the cash count. d. For the $10,000,000 bank loan outstanding at the year-end, the auditors should request the confirmations by the bank and check the loan details including the loan amount and interest and the term for repayments.
ACCT410 Section 3
Reference
Lau, T.Y.P. and Lam, C.Y.N. (2012). Auditing and Assurance in Hong Kong. 3rd Edition, Pilot Publishing Company. Ch.28, 29, 36, 44, 48