Auditing’;Falmer Metals Ltd case ;
Added on 24.11.2014 22:48
Falmer Metals Ltd case
Your firm has recently been appointed as the external auditor of Falmer Metalwork
Ltd (Falmer). You are the senior responsible for planning the external financial audit for the year ended 30September 2014 and the engagement partner has asked you to consider the following key areas of audit risk:
(A) Work in progress
(B) Trade receivables
(C) Trade payables
Falmer supplies high quality, fashionable, customised light fittings to hotels and restaurants. Customers commission Falmer to design and construct light fittings to their specific requirements using specialist metals. When a customer commissions work, a Falmer designer meets with the customer to draw the design and calculate a fixed price for the work. The customer is required to provide written approval of the design and price before the design is passed to the production team who order the metals required and construct the light fitting. Customers are invoiced and revenue is recognised when the light fittings are despatched, which may be many months after the date of the commission. Falmer’s credit terms are 30 days.
All direct costs (labour, metal and other materials) relating to each commission are recorded in Falmer’s job costing system. Each month these direct costs are manually transferred into the job costing system from the payroll and purchases systems. The direct costs recorded in the job costing system are used as a basis for the calculation of the work in progress figure to be included in the financial statements. The finance director adds 20% to the direct costs to cover overheads.
It is Falmer’s policy to order the metals required for a commission only when written approval of the design is received from the customer. Metals are purchased from suppliers around the world who invoice Falmer in their local currency.
Falmer’s light fittings have recently become very fashionable and the volume of commissions has grown rapidly. As a result, Falmer sourced its metals from a number of new suppliers during the year, to avoid production delays. However, it has experienced quality issues with metals from some of the new suppliers which have resulted in a number of customer complaints.
In April 2014 Falmer’s finance director appointed an internal auditor, Chris Forbes, as she was concerned that Falmer’s internal controls were inadequate for the increasing size of the business. She instructed Chris to undertake a review of Falmer’s internal controls over purchasing. Chris concluded that the internal controls were effective with the exception of the following internal control deficiencies:
• Supplier statements are not retained or reconciled with the payables ledger.
• Metals were ordered and work started on some commissions before written approval of the design and price were obtained from the customer.
Chris resigned and left his post as internal auditor in September 2014 without completing his final report on the internal controls over purchasing. The engagement partner has provided you with the following extracts from the financial statements of
Falmer which are to be used as part of your consideration of the key audit risks:
Statement of profit or loss for the year ended 30September
Revenue 8,997 6,128
Cost of sales (6,468) (4,413)
Gross profit 2,529 1,715
Statement of financial position as at 30September
Work in progress 1,015 587
Trade receivables 980 451
Trade payables 571 483
On 1 June 2014, Falmer acquired 100% of the ordinary share capital of York Ltd
(York). Falmer is required to prepare group financial statements for the year ended
30 September 2014 and your firm will act as group auditor. York’s financial statements for the year ended 30 September 2014 will be audited by another audit firm, Huggett LLP. The financial statement extracts above exclude financial information relating to York.
Discuss the main audit postulates and concepts relevant to this case.
You should illustrate your answers with reference to relevant audit theory and comparison with real world examples where possible
Could you use:
Subject matter remote, complex, significant for the discharge of the duty
Standard of accountability can be set, measure and compare with known criteria.
Concept of Materiality
Concept of Audit Risk
PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET AN AMAZING DISCOUNT 🙂
Compelling correspondence is essential to the achievement all things considered but since of the changing idea of the present working environments, successful correspondence turns out to be more troublesome, and because of the numerous impediments that will permit beneficiaries to acknowledge the plan of the sender It is restricted. Misguided judgments.In spite of the fact that correspondence inside the association is rarely completely open, numerous straightforward arrangements can be executed to advance the effect of these hindrances.
Concerning specific contextual analysis, two significant correspondence standards, correspondence channel determination and commotion are self-evident. This course presents the standards of correspondence, the act of general correspondence, and different speculations to all the more likely comprehend the correspondence exchanges experienced in regular daily existence. The standards and practices that you learn in this course give the premise to additionally learning and correspondence.
This course starts with an outline of the correspondence cycle, the method of reasoning and hypothesis. In resulting modules of the course, we will look at explicit use of relational connections in close to home and expert life. These incorporate relational correspondence, bunch correspondence and dynamic, authoritative correspondence in the work environment or relational correspondence. Rule of Business Communication In request to make correspondence viable, it is important to follow a few rules and standards. Seven of them are fundamental and applicable, and these are clear, finished, brief, obliging, right, thought to be, concrete. These standards are frequently called 7C for business correspondence. The subtleties of these correspondence standards are examined underneath: Politeness Principle: When conveying, we should build up a cordial relationship with every individual who sends data to us.
To be inviting and polite is indistinguishable, and politeness requires an insightful and amicable activity against others. Axioms are notable that gracious “pay of graciousness is the main thing to win everything”. Correspondence staff ought to consistently remember this. The accompanying standards may assist with improving courtesy:Preliminary considering correspondence with family All glad families have the mystery of progress. This achievement originates from a strong establishment of closeness and closeness. Indeed, through private correspondence these cozy family connections become all the more intently. Correspondence is the foundation of different affiliations, building solid partners of obedient devotion, improving family way of life, and assisting with accomplishing satisfaction (Gosche, p. 1). In any case, so as to keep up an amicable relationship, a few families experienced tumultuous encounters. Correspondence in the family is an intricate and alluring marvel. Correspondence between families isn’t restricted to single messages between families or verbal correspondence.
It is a unique cycle that oversees force, closeness and limits, cohesiveness and flexibility of route frameworks, and makes pictures, topics, stories, ceremonies, rules, jobs, making implications, making a feeling of family life An intelligent cycle that makes a model. This model has passed ages. Notwithstanding the view as a family and family automatic framework, one of the greatest exploration establishments in between family correspondence centers around a family correspondence model. Family correspondence model (FCP) hypothesis clarifies why families impart in their own specific manner dependent on one another ‘s psychological direction. Early FCP research established in media research is keen on how families handle broad communications data. Family correspondence was perceived as an exceptional scholastic exploration field by the National Communications Association in 1989. Family correspondence researchers were at first impacted by family research, social brain science, and relational hypothesis, before long built up the hypothesis and began research in a family framework zeroed in on a significant job. Until 2001, the primary issue of the Family Communication Research Journal, Family Communication Magazine, was given. Family correspondence is more than the field of correspondence analysts in the family. Examination on family correspondence is normally done by individuals in brain science, humanism, and family research, to give some examples models. However, as the popular family correspondence researcher Leslie Baxter stated, it is the focal point of this intelligent semantic creation measure making the grant of family correspondence special. In the field of in-home correspondence, correspondence is normally not founded on autonomous messages from one sender to one beneficiary, yet dependent on the dynamic interdependency of data shared among families It is conceptualized. The focal point of this methodology is on the shared trait of semantic development inside family frameworks. As such, producing doesn’t happen in vacuum, however it happens in a wide scope of ages and social exchange.
Standards are rules end up being followed when performing work to agree to a given objective. Hierarchical achievement relies significantly upon compelling correspondence. So as to successfully impart, it is important to follow a few standards and rules. Coming up next are rules to guarantee powerful correspondence: clearness: lucidity of data is a significant guideline of correspondence. For beneficiaries to know the message plainly, the messages ought to be sorted out in a basic language. To guarantee that beneficiaries can without much of a stretch comprehend the importance of the message, the sender needs to impart unmistakably and unhesitatingly so the beneficiary can plainly and unquestionably comprehend the data.>