Following is the trial balance of Xemco for the year ending 30 September 2013.

 

       $'000      $'000
Revenue   215,000
Cost of sales 134,000  
Contract to construct asset 4,000  
Distribution costs 13,500  
Administrative expenses 16,500  
Bank interest 900  
Dividend 2,000  
Land ($12 million) and building ($48 million) at cost (note (i)) 60,000  
Owned plant and equipment at cost (note (i)) 65,700  
Leased plant at initial carrying amount (note (i)) 35,000  
Accumulated depreciation at 1 October 2012:    
   building   10,000
   owned plant and equipment   17,700
   leased plant   7,000
Inventory at 30 September 2013 26,600  
Trade receivables 38,500  
Bank   5,300
Trade payables   21,300
Equity shares of 20 cents each   45,800
Share premium   3,200
Loan note   40,000
Retained earnings at 1 October 2012   31,400
  ––––––– –––––––
  396,700 396,700
  ––––––– –––––––

 

NOTES:

(i) No depreciation has been charged on the property plant and equipment for the year. Building should be depreciated using 20 years life on the original cost. Owned plant should be depreciated using 20% reducing balance method and leased plant should be depreciated using 10 years life on the initial carrying amount. Depreciation is charged in Cost of goods sold.

(ii) Estimated tax for the year is $200,000

Comment on the matters to be considered, and explain the audit evidence you should expect to find during your file review in respect of the trade receivable recognized in relation to Cherry Co.

Marks:

Evaluate the audit junior's concerns regarding the management of the audit of Sultana Co.

Marks:

Explain the components of audit risk and, for each component, state an example of a factor which can result in increased audit risk.

Marks:

Using the information provided, identify and describe FIVE audit risks and explain the auditor’s response to
each risk in planning the audit of Abrahams Co.

Marks:

Describe substantive procedures you should perform to obtain sufficient appropriate evidence in relation to:
(i) Inventory held at the third party warehouses; and
(ii) Use of standard costs for inventory valuation.

Marks:

Prepare a statement of profit or loss for the next year for APX Co using the information provided

Marks: 4

Prepare a statement of financial position at the end of the next year for APX Co using the information above

Marks: 5

Analyze and discuss the working capital financing policy of APX Co

Marks: 6

Discuss the role of financial intermediaries in providing short-term finance for use by business organizations.

Marks: 5

Advise whether the factor’s offer is financially acceptable to Widnor Co.

Marks: 7