Course: Assurance and Audit Services You are the Manager-in-charge of the audit of Jasa Packaging Sdn. Bhd., a subsidiar

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Course: Assurance and Audit Services
You are the Manager-in-charge of the audit of Jasa Packaging
Sdn. Bhd., a subsidiary of Jasa Holdings Berhad, for the year ended
30 June 2021. JASA is engaged in the manufacturing of a wide range
of plastic packaging products. While reviewing the initial work
performed by your audit team, the following matters have come to
your attention:
(i) The quantity of material scrapped during the
year is materially different from the quantity of scrap sold. The
company’s records show nil balance both at the beginning and at the
end of the financial year. No reconciliation for the difference has
been provided by JASA.
(ii) Sales revenue for the year has increased by 7%
over the previous year. However, it has been noted that sales in
the last two weeks of June 2021 have been exceptionally high and
represent 15% of the annual sales. The audit working papers carry
the following observations in respect of the above:
(iii) During the year, JASA purchased a new machine for RM2
million. The payment voucher is duly supported by the invoice from
the supplier. However, the fixed assets schedule provided by the
client shows the amount capitalised as RM200,000 million.
Depreciation has been charged on this amount. The difference of
RM1.8 million appears in the bank reconciliation statement.
REQUIRED
(a) Evaluate each of the independent situations
(i) to (iii) above and justify the type of misstatement it
represents a fraud or an error.
(b) What actions would you take to deal with
the above matters?