题目内容

(a) Explain FOUR factors which influence the reliability of audit evidence. (4 marks)
Andromeda Industries Co (Andromeda) develops and manufactures a wide range of fast moving consumer goods. The company’s year end is 31 December 2015 and the forecast profit before tax is $8·3 million. You are the audit manager of Neptune & Co and the year-end audit is due to commence in January. The following information has been gathered during the planning process:
Inventory count
Andromeda’s raw materials and finished goods inventory are stored in 12 warehouses across the country. Each of these warehouses is expected to contain material levels of inventory at the year end. It is expected that there will be no significant work in progress held at any of the sites. Each count will be supervised by a member of Andromeda’s internal audit department and the counts will all take place on 31 December, when all movements of goods in and out of the warehouses will cease.
Research and development
Andromeda spends over $2 million annually on developing new product lines. This year it incurred expenditure on five projects, all of which are at different stages of development. Once they meet the recognition criteria under IAS 38 Intangible Assets for development expenditure, Andromeda includes the costs incurred within intangible assets. Once production commences, the intangible assets are amortised on a straight line basis over five years.
Required:
(b) Describe audit procedures you would perform. during the audit of Andromeda Industries Co:
(i) BEFORE and DURING the inventory counts; and (8 marks)
(ii) In relation to research and development expenditure. (4 marks)
(c) During the audit, the team discovers that one of the five development projects, valued at $980,000 and included within intangible assets, does not meet the criteria for capitalisation. The finance director does not intend to change the accounting treatment adopted as she considers this an immaterial amount.
Required:
Discuss the issue and describe the impact on the audit report, if any, if the issue remains unresolved. (4 marks)

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During the year, the directors reviewed the useful lives and depreciation rates of all classes of plant and machinery. This resulted in an overall increase in the asset lives and a reduction in the depreciation charge for the year.
Inventory is held in five warehouses and on 28 and 29 December a full inventory count will be held with adjustments for movements to the year end. This is due to a lack of available staff on 31 December. In October, there was a fire in one of the warehouses; inventory of $0·9 million was damaged and this has been written down to its scrap value of $0·2 million. An insurance claim has been submitted for the difference of $0·7 million. Venus is still waiting to hear from the insurance company with regards to this claim, but has included the insurance proceeds within the statement of profit or loss and the statement of financial position.
The finance director has informed the audit manager that the October and November bank reconciliations each contained unreconciled differences; however, he considers the overall differences involved to be immaterial.
A directors’ bonus scheme was introduced during the year which is based on achieving a target profit before tax. In order to finalise the bonus figures, the finance director of Venus would like the audit to commence earlier so that the final results are available earlier this year.
Required:
Describe FIVE audit risks, and explain the auditor’s response to each risk, in planning the audit of Venus Magnets Co.

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