The previous senior auditor on the engagement noted during interim testing that the roll-out of...
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The previous senior auditor on the engagement noted during interim testing that the roll-out of the new product line has not been going smoothly. In the early months of 2017, the Company was engaged in research relating to a new procedure to make their pottery products in the new home dcor line unbreakable, making the products desirable to families with small children. The Company indicated that the result of that research was successful, and the new technology was scheduled to be incorporated into the manufacturing process. However, implementing the new process took longer than expected. Shipments of product to retailers relating to products in the new home dcor line did not commence before the holiday period of 2017, and the roll-out was deferred until 2018. Because of the success of the research and long-term benefits that the research was going to provide to the Company, management has capitalized $300,000 of research costs as a deferred asset on this years balance sheet, and intends to amortize those costs over 20 years.
Please state the issue an external auditors perspective.
Thanks.
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