Question 4 As the partner in charge of the audit engagement of Serba Serbi...
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Question 4 As the partner in charge of the audit engagement of Serba Serbi Berhad, you have reviewed the audit working papers. The audit team has highlighted the following matters in the working papers. (a) Twenty per cent (20%) of Serba Serbis recorded revenue comprises cash sales. Proper records of cash sales have not been maintained. Consequently, the audit team was unable to design audit procedures to verify the cash sales. (b) During the current year, the company changed the method of charging depreciation on its fixed assets from the straight line to the diminishing balance method. However, all the required disclosures have been included in the notes to the financial statements. (c) The previous years financial statements were audited by another firm of chartered accountants, which has issued an unmodified opinion on those financial statements. REQUIRED Discuss the impact of each of the above matters on the auditors report. (5 + 4 + 5 = 14 marks) Response Template (4) Answer Event Impact on auditors report Reasons/Explanations Marks (a) Cash sales record not adequately maintained. /5 (b) Change in depreciation charging method /4 (c) Previous year audit by another auditor. /5
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