Auditing and assurance revision question (NBAA C2, MAY 2017)

(a)    In the course of a new audit of a large established limited company, trading as multiple grocers you discover that no entry has been made for rents payable accrued to the date of the statement of financial position. You are told that it is not the company’s practice to make these accruals and that it is unnecessary to do so as the accounts for the year include a full year’s charge.  You subsequently ascertain that rates paid for a period extending beyond the end of the accounting year have not been carried forward in the statement of financial position but the statement of profit or loss contains a twelve months charge.

REQUIRED:
State the considerations that would determine your action in these circumstances.

(b)  As auditors of an entity you are examining clients account and you find that:

(i)    An intangible asset not included in the list of assets (not accounted for) and not amortized;

(ii)  An asset valued at an open market value to the amount that was in excess of its carrying amount  and the excess has been credited to revaluation reserves.

REQUIRED:
State the main points to which you would direct attention in each of these circumstance

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