Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 6, Problem 13QE
To determine
Explain the various steps to be considered by an analyst while developing a comparable accounting data to assist conducting of the profitability and risk analysis of firms.
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Your audit firm, Vreg & Co has assigned you, the audit senior to take charge of the trade receivables audit of Joy Toys Sdn Bhd for its financial year ended 30 September 2020. Your tasks include the organization of a trade receivables confirmation in respect of balances as at that date. Joy Toys Sdn Bhd, is appointed by a US based company and granted the exclusive right to distribute children’s toys. The company debtors ageing indicates that there are in excess of 450 accounts in its trade receivables ledger, with total balances outstanding of RM2,500,000 as at 30 September 2020. You have selected a number of trade receivables accounts for inclusion in the confirmation. Your first task is to draft a confirmation letter for your audit manager to review.
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Describe the TWO (2) types of accounts receivable confirmationrequests, namely positive and negative confirmation. Indicate the factors you will consider in determining when to use each type.
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Oscar Wylee Women Glass Ltd is a supplier of fashion women sunglasses. The audit report for the year ended 30 June 2021 was signed on 8 August 2021, and the financial report was mailed to shareholders on 12 August.
Requirement:
Consider the following independent events. Assume that each event is material.
For each of the individual misstatements listed, explain auditors' responsibility and consequence auditing report
On 5 July, Oscar Wylee entered into a new contract to deliver sunglasses to Specsavers, a new major department store. The contract was similar to other previously contracted contracts.
Oscar Wylee has financed huge funds in developing a new type of solid sunglasses lens. On 8 July, Oscar Wylee applied for a patent for the lens, only to identify that a competitor had lodged a similar application on 25 June. The granting of Oscar Wylee application is now of major concern.
Oscar Wylee Women Glass Ltd is a supplier of fashion women sunglasses. The audit report for the year ended 30 June 2021 was signed on 8 August 2021, and the financial report was mailed to shareholders on 12 August.
Consider the following independent events. Assume that each event is material.
On 5 July, Oscar Wylee entered into a new contract to deliver sunglasses to Specsavers, a new major department store. The contract was similar to other previously contracted contracts .
Oscar Wylee has financed huge funds in developing a new type of solid sunglasses lens. On 8 July, Oscar Wylee applied for a patent for the lens, only to identify that a competitor had lodged a similar application on 25 June. The granting of Oscar Wylee application is now of major concern.
One of Oscar Wylee major customers, Phoenix Pty Ltd, suffered a fire on 23 July. Since Phoenix Pty Ltd was uninsured, it is unlikely that their accounts receivable balance will be paid.
On 27 July, a well-known financial…
Chapter 6 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
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