Assignment Task
Background:
Your audit firm is TAF & Co (you can change your firm’s name). You have been assigned one audit job on KURMA SEJUK Sdn Bhd (KSSB) for the year ended 31 December 2020. The client has provided the relevant data and documents for the audit.
Your manager has asked you to perform audit of PPEs, Cash, Account Receivables / Trade Debtors and Account Payables / Trade Creditors accounts. Therefore, you are required to prepare audit working papers (with proper audit index, tick marks and cross-referencing) for documenting all relevant audit procedures that are performed on all items related to those accounts. However, before the audit work can be commenced, your manager also asks you to prepare an audit program for the job.
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Get Help Now!Information Concerning the PPEs, Cash, Account Receivables / Trade Debtors and Account Payables / Trade Creditors accounts:
Your client provided the following information concerning the events or transactions occurred during the financial year end 31 December 2020.
A. FIXED ASSETS
1) List of fixed assets and depreciation amount is in the fixed asset register attached in Appendix A- Fixed Assets.
2) The Photocopy machine (Xerox 4350×5 Model 2000) has not been used for one year because the spare part is no longer available in the market. The purchase price was RM10,000 and it has been fully depreciated since 2005. There is no residual value for this machine.
3) In February 2020, KSSB acquired a new vehicle for the company’s transportation purpose. KSSB purchased a Perodua Ativa and registered under the company’s vehicle usage. The price per unit was RM72,000. KSSB has obtained a loan from Bank Muamalat using a hire purchase facility of RM50,000. The vehicle was registered under the KSSB’s director name, Encik Edika Yahya. The vehicle ownership certificate (VOC) is attached in Appendix B-Fixed Assets.
4) The KSSB company’s building has taken on a new look in 2020 by repainting and adding a new mural painting which amounted KSSB RM30,055. This cost was capitalised in the accounts as building renovation in 2020. No depreciation was allocated to this item so far.
5) The company’s policy on fixed asset capitalisation is to capitalise as an asset, any capital expenditure above RM3,000. The motor vehicle will be depreciated at the rate of 20% per year. In addition, the depreciation will be made for a full year of purchase regardless of the date of purchase.
B. CASH AND BANK
KSSB has recorded RM1,131,524 and RM900,546 in its cash and bank balances as at 31 December 2020 and 2019 respectively. The following is information concerning the current year cash and bank balances.
1) KSSB accepts cash, cheques and also electronic fund transfers from its customers. However, KSSB only issue payments via cheques and electronic fund transfers. Cash payments are only made for Petty Cash items.
2) The auditors have received the bank confirmations from the two banks used by KSSB. Refer Appendix C for Cash and Bank.
3) KSSB also has prepared bank reconciliation statements for the two banks, together with its notes. All items to be adjusted from the bank reconciliation have not been posted. Refer Appendix C for Cash and Bank.
4) KSSB has a Petty Cash of RM2,000 for its daily operations.
GROUP ASSIGNMENT REQUIREMENTS
a) Prepare audit working papers (related to information on items A to D) for Kurma Sejuk Sdn Bhd’s financial statements for the year ended 31 December 2020. The audit working papers will serve as a group report which includes at least the following:
o Audit program (for substantive tests only)
o Audit procedures performed.
o Audit evidence accumulated.
o Audit findings
b) Identify the audit objectives and audit procedures for the fixed assets, cash and bank, trade debtors / account receivables and trade creditors / account payables sections. If the transaction is also related to another section, the audit work for that particular section needs to be addressed.
c) Show all the necessary adjustment journal entries and explanation (working/calculation) in the audit working papers for each section / element in the financial statements.
d) Show the audit procedures performed by using the “tick code”. There is no standard tick code, therefore you could use your own symbols. Please ensure that the tick code or symbol is unique to each individual audit procedure. However, the tick code for the same audit procedures should be consistent across sections. For example, ? is used for footing the figures in creditors, thus it should be used for footing figures in the debtors or cash sections.
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