Beruflich Dokumente
Kultur Dokumente
Seminar Group 1
Presentation 1
6 September 2018
Team 1:
Alvin Tan Jun Rong
Elysia Chua Hui Yi
Jonathan Low Wen Xun
Ng Jing Hui Rachel
William Elmer Winarto
A (i)
What are the challenges likely to be encountered by
auditors in reporting key audit matters (KAM)?
What is KAM?
Matters that, in the auditor’s professional judgement were of most
significance in the audit of the financial statements of the current
period. They are selected from matters communicated with those
charged with governance:
More Increase in
interaction professional skepticism
Singapore 42%
UK 20%
Arguments for describing the outcome
/findings of the auditor’s procedures
1 2 3 4
Reduce uncertainty Users of financial Provides a real value Provides insight into
about how the statements would be add, giving colour as the auditor’s
auditor resolved the interested in not to whether judgements at the
matter when only what auditors management’s more granular level
forming the opinion did but also what judgements were of identified risks
on the financial they found balanced, mildly rather than at the
statements as a optimistic or mildly overall financial
whole pessimistic in the statement level.
view of the auditor.
Arguments against describing the outcome
/findings of the auditor’s procedures
Yes
Qualified opinion
Is the matter No
Qualified opinion
pervasive?
Adverse Disclaimer
Is the matter pervasive?
Event is confined to specific elements, accounts or items of the financial statements.
Yes No
Adverse Qualified
Sum from this event is a substantial Sum from this event is not a substantial
proportion of the financial statement. proportion of the financial statement.
B (ii)
You are undertaking the audit for the year ended 30 June 2018 of Durable Drums Ltd, a
manufacturer and retailer of steel drums. As in previous years, Durable Drums has
accounted for inventory on a last in first out (LIFO) basis. Durable Drums also uses a
‘just-in-time’ inventory management system and therefore the effect of this departure
from Australian accounting standards was previously not material. In the current year,
however, the company has a large stockpile of inventory at year end, due to an unexpected
cancellation of a major order en route to its destination. In order to cut freight costs,
Durable Drums stored the goods temporarily in Thailand, hoping for an order from another
South-east Asian customer.
Unfortunately, you were not told of this problem until after balance date and did not
conduct a stocktake of the inventory. You have also been told that some of the inventory
has since been shipped to a number of different customers to fill outstanding orders. The
available audit procedures have been unable to validate the existence of this inventory at
balance date. The relevant inventory is currently recorded at $2,500,000. Audit
procedures have indicated that, had inventory been accounted for on a first in, first out
(FIFO) basis, it would have been recorded at $3,500,000. Materiality for the audit has been
set at $1,000,000.
What is the most appropriate auditor’s
opinion for Durable Drums for the year
ended 30 June 2018? Explain your answer.
1. “You were not told of this problem”
● Unmodified
○ Sales Information are reported correctly
○ OM to explain to reader that sales in annual
report is not misstated while Chairman
report is wrong.