QUESTION 1 Sharon Mae is the audit manager of Dole & Company. You are currently reviewing the audit files for several of

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QUESTION 1
Sharon Mae is the audit manager of Dole & Company. You are
currently reviewing the audit files for several of your clients,
for which the audit fieldwork is complete. The audit seniors have
raised the following issues:
Johnson and Brown
Johnson and Brown is an asphalt company and has incurred research
expenditure of $5.6m and development expenditure of $8.7m during
the year. This has all been capitalised as an intangible asset.
Profit before tax is $36·3m.
Bridge and Company
The payroll information of Bridge and Company is backed up on a
daily basis. With the change to the payroll software for a period
of two months, the wages records and the back-ups have been
corrupted, and therefore cannot be accessed. Wages and salaries for
these two months are $3·1m. Profit before tax is $15m.
Required:
Analysing each of the client files above:
(i) For each issue, discuss whether each is material to
the audit;
(10
marks)
(ii) If the above issues remain unresolved, describe the
impact these would have on the
audit reports.
(10
marks)
(Total
= 20 marks)