Paramount Solutions is one of the audit client, during the audit, followings were observed: Receivables reported in bala
Posted: Wed Apr 27, 2022 10:54 am
Paramount Solutions is one of the audit client, during the audit, followings were observed:
Receivables reported in balance sheet include Receivable from Allied Electro amounting $37,500/- Allied Electro is a credit customer of Paramount Solutions and these funds are due for receipt after 1 month. From an independent source it just came to knowledge that Allied Electro is facing liquidity/cash management issues and banks have declined the loan application of Allied Electro.
Moreover during the year, a plant (equipment) was lost by theft, client management is reluctant to share any details related to this theft with auditor, this plant was bought two years ago at a cost of $45,000. Client’s Finance Head warns that if audit firm wants to continue auditing paramount solutions, they should not inquire about loss by theft.
Further, it was observed that a fine penalty amounting $25,000 was paid during the year, this fine was levied/charged to company due to polluting the environment. This fine penalty was recognized as Intangible asset in books of account.
Additional Information:
Sales for the year: $180,000/-
Profit for the year: $78,000/-
Requirement:
Assuming that you are Audit Manager of Audit Firm responsible for audit of Paramount Solutions. Please discuss the reporting implications (on audit report) of above mentioned scenarios.
Question 2 (10 Marks)
Write down the fundamental principles/set of professional values that an auditor should not compromise and maintain during whole audit process.
Receivables reported in balance sheet include Receivable from Allied Electro amounting $37,500/- Allied Electro is a credit customer of Paramount Solutions and these funds are due for receipt after 1 month. From an independent source it just came to knowledge that Allied Electro is facing liquidity/cash management issues and banks have declined the loan application of Allied Electro.
Moreover during the year, a plant (equipment) was lost by theft, client management is reluctant to share any details related to this theft with auditor, this plant was bought two years ago at a cost of $45,000. Client’s Finance Head warns that if audit firm wants to continue auditing paramount solutions, they should not inquire about loss by theft.
Further, it was observed that a fine penalty amounting $25,000 was paid during the year, this fine was levied/charged to company due to polluting the environment. This fine penalty was recognized as Intangible asset in books of account.
Additional Information:
Sales for the year: $180,000/-
Profit for the year: $78,000/-
Requirement:
Assuming that you are Audit Manager of Audit Firm responsible for audit of Paramount Solutions. Please discuss the reporting implications (on audit report) of above mentioned scenarios.
Question 2 (10 Marks)
Write down the fundamental principles/set of professional values that an auditor should not compromise and maintain during whole audit process.