HI6026 Assessment Questions On Audit, Assurance And Compliance

Question 6 (11 marks)

ACCO Ltd is a large producer of organic medicinal products. The audit report for the year ended 30 June 20X8 was signed on 6 August 20X8 and along with the financial report was mailed to shareholders on 11 August 20X8.

Consider the following independent events. Assume that each event is material.

1. On 5 July, ACCO Ltd entered into a new contract to supply organic facial and skin treatment products to MYA, a new major department store. The contract was similar in nature to other contracts previously negotiated. (2.75 marks)
2. ACCO Ltd has invested significant funds in developing a new range of organically sourced skin cancer treatment ointments. On 8 July, ACCO Ltd applied for a patent for the ointment, only to discover that a competitor had lodged a similar application on 20 June. The granting of ACCO Ltd’s application is now in serious doubt. (2.75 marks)
3. Internal audit has uncovered a major fraud at one of ACCO Ltd’s branches. The fraud was perpetrated by two senior staff, acting in collusion over a number of years. The internal auditors released their report to management on 15 July, after a highly confidential investigation spanning several months. (2.75 marks)
4. One of ACCO Ltd’s major customers, Cheap Vitamins Pty Ltd, suffered a fire on 20 July. Since Cheap Vitamins Pty Ltd was uninsured, it is unlikely that their accounts receivable balance will be paid. (2.75 marks)

Required:

For each of the above events, state the appropriate action (if any) that the auditor would require. Give reasons.