QUESTION 2 (25 Marks)During the “understanding the entity and its environment” stage ofplanning for...QUESTION 2 During...

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Accounting

QUESTION 2

During the “understanding the entity and its environment” stage ofplanning for the audit of Novex (Pty) Ltd you obtain the followinginformation, inter alia, about the company. 1. The company importslarge quantities of inventory. 2. Some of the products which Novex(Pty) Ltd sells have expiry dates, after which they are notuseable. 3. The company sells, inter alia, chemicals. 4. Inventoryis stored in several warehouses around Namibia. 5. 40% of thecompany’s sales are for cash. 6. During the year under audit,credit terms and policies were made less stringent to boost sales.7. The company’s manufacturing division leases some of its assets.8. Obtaining spares for some of the manufacturing assets which thecompany owns, is extremely difficult which has resulted in a numberof machines standing idle.
9. The work force at Novex (Pty) Ltd fluctuates quite significantlyfrom month to month. Casual labour is brought in frequently forshort periods.

YOU ARE REQUIRED TO identify the financial statement assertionswhich will be affected by the above information. Providereasons.

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financial statement assertions are 1 existence or occurance 2 completeness 3 accuracy 4valuation 5rights and obligations 6 presentation and disclosure financial statement See Answer

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In: AccountingQUESTION 2 (25 Marks)During the “understanding the entity and its environment” stage ofplanning for...QUESTION 2 During the “understanding the entity and its environment” stage ofplanning for the audit of Novex (Pty) Ltd you obtain the followinginformation, inter alia, about the company. 1. The company importslarge quantities of inventory. 2. Some of the products which Novex(Pty) Ltd sells have expiry dates, after which they are notuseable. 3. The company sells, inter alia, chemicals. 4. Inventoryis stored in several warehouses around Namibia. 5. 40% of thecompany’s sales are for cash. 6. During the year under audit,credit terms and policies were made less stringent to boost sales.7. The company’s manufacturing division leases some of its assets.8. Obtaining spares for some of the manufacturing assets which thecompany owns, is extremely difficult which has resulted in a numberof machines standing idle.9. The work force at Novex (Pty) Ltd fluctuates quite significantlyfrom month to month. Casual labour is brought in frequently forshort periods.YOU ARE REQUIRED TO identify the financial statement assertionswhich will be affected by the above information. Providereasons.