RSM426H1 Lecture Notes - Lecture 4: Audit Evidence, Going Concern, Accrual
31 Jan 2018
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Issue #2: inventory cost formula: not a strong reasoning to use fifo rather than weighted average. Jill"s approa(cid:272)h alig(cid:374)s (cid:449)ith her (cid:271)ias to redu(cid:272)e the pur(cid:272)hase pri(cid:272)e (cid:894)redu(cid:272)e (cid:374)et assets thus redu(cid:272)e purchase price) Issue #3: inventory layaway transaction: aspe section 3400. Jill claims a sale has occurred, thus inventory must be written down by ,000 and receivable recorded: sale of inventory was not guaranteed on this date, sales made should only be recorded upon delivery of layaway purchase. Layaway was properly accounted for by auditor: conclusion, the cash deposit should be recorded as a liability. Jill"s approa(cid:272)h alig(cid:374)s (cid:449)ith her (cid:271)ias to redu(cid:272)e pur(cid:272)hase pri(cid:272)e (cid:271)y redu(cid:272)i(cid:374)g i(cid:374)(cid:448)e(cid:374)tory (cid:449)ith a write-down. Issue #6: gw and intangibles: carl"s lea(cid:448)e does (cid:374)ot i(cid:373)pa(cid:272)t gw of the (cid:272)o(cid:373)pa(cid:374)y, co(cid:374)(cid:272)lusio(cid:374): l"s re(cid:272)orded a(cid:373)ou(cid:374)t is reaso(cid:374)a(cid:271)le. Issue #1: firm independence: being a long-time auditor of a small company is not unusual, thus, no reason to question.
