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时间：2023-10-17
2023/10/17 12:16 9.3 Tutorial: ACCT3600 Accounting and Auditing in Practice
https://canvas.sydney.edu.au/courses/53454/pages/9-dot-3-tutorial?module_item_id=1996138 1/4
9.3 Tutorial
This is a space to find resources and instructions relating to your
weekly tutorial.
This week's tutorial
This week, you will be working in your groups on the following exercises:
(Select ► to reveal)
Exercise 1
You are the auditor of Northern Forest Ltd for the year ended 30 June 2018. The audit of
Northern Forest was extremely difficult this year, as the company did not keep appropriate
books and records. As the accounting department was chronically understaffed, transactions
were not entered promptly and reconciliations not performed. In an attempt to sort out the
mess, a temporary accountant was employed; however, she was unable to even reconcile the
bank account at year end. You are not satisfied all transactions that occurred during the year
are reflected in the financial report.
Required: What Auditor's Opinion should be issued here? Should there be anything else
included in the Auditor's report?
Exercise 2
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.
2023/10/17 12:16 9.3 Tutorial: ACCT3600 Accounting and Auditing in Practice
https://canvas.sydney.edu.au/courses/53454/pages/9-dot-3-tutorial?module_item_id=1996138 2/4
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.
Required: What Auditor's Opinion should be issued here? Should there be anything else
included in the Auditor's report?
Exercise 3
You are the audit partner at Preston & Associates, a mid-tier audit firm. You are responsible for
the audits of the following three independent entities for the year ended 30 June 2018:
Required: What Auditor's Opinion should be issued for each of the below cases? Should
there be anything else included in the Auditor's report?
a) Helping Hand Ltd is a non-profit entity. You have discovered that it has not kept
substantiating vouchers or receipts for more than 65 per cent of its expenses, excluding
salaries and allowances.
b) Skyscraper Ltd is a building contractor with a varying workload. In order to compensate for
the irregularity of its contracted building projects, Skyscraper also purchases large vacant
blocks of land that it later subdivides for the construction of houses and units. Skyscraper then
sells these on its own account. Your analysis strongly suggests that the apportionment of costs
to houses and units sold has been kept low in order to boost profits. In your opinion, this has
resulted in the overvaluation of the unsold properties. The directors of the company do not
agree, and hold to their view that the stock of properties is correctly valued.
c) Big Event Ltd arranges for popular overseas entertainment artists to perform in Australia.
The band Eclipse was booked by Big Event to play in major cities across the country. Big
Event’s written contract required the company to pay the band in US dollars but, in order to
reduce costs, it did not hedge the amounts. Subsequent to year end, the Australian dollar fell
against the US dollar and a substantial loss relating to the band’s tour was predicted. The
management of Big Event tried unsuccessfully to renegotiate the band’s contract and has been
unable to obtain finance to cover the expected shortfall. Big Event has now cancelled the tour
and expects a substantial claim from Eclipse. It is clear to you, as the auditor, that Big Event
does not have the income, cash or other assets to sustain such a loss.
Exercise 4
2023/10/17 12:16 9.3 Tutorial: ACCT3600 Accounting and Auditing in Practice
https://canvas.sydney.edu.au/courses/53454/pages/9-dot-3-tutorial?module_item_id=1996138 3/4
You are the auditor of Clean Energy Ltd (CEL) for the year ended 30 June 2018. While
completing your audit and finalising your auditor’s report, you discover that the company has
incorrectly stated in the chairperson’s review of operations that CEL has complied with
environmental guidelines regarding its carbon emissions. Non-compliance with these
guidelines was investigated during the audit and it was noted (in a conversation with a junior
manager) that CEL’s emissions were significantly above compliance standards. There is
currently no financial implication for non-compliance, so no further action was taken. You
believe, however, that the statement in the annual report will affect the perception of readers of
the annual report regarding the company’s entitlement to future environmental incentives. This
information is likely to lead to a material adjustment of CEL’s share price.
Required: What action should the Auditor do in this situation? What Opinion should be
issued here? Should there be anything else included in the Auditor's report?
Additional exercise on Subsequent Events
George Blewett is the engagement partner for the financial report audit of Play Equipment Ltd
for the year ended 30 June 2018. The following material events or transactions have come to
George’s attention before he is scheduled to issue his report on 31 August 2018:
(a) On 14 July 2018, Play Equipment settled and paid a personal injury claim of a former
employee as a result of an accident that occurred in March 2017. The company has not
previously recorded a liability for the claim.
(b) On 17 July 2018, Play Equipment agreed to purchase for cash the outstanding shares of
Recreational Equipment Ltd. This acquisition is likely to double the sales volume of Play
Equipment.
(c) On 20 August 2018, the directors became aware of broken glass found in their pre-
packaged sandpits. This product had only been on sale for two weeks and had been
purchased directly from the manufacturer, Sandpit Ltd, an unrelated company in Thailand, one
week prior to being introduced to the public.
(d) On 3 August 2018, a plant owned by Play Equipment was damaged in a flood, resulting in
an uninsured loss of inventory.
Required: Identify the type of SE (adjust or non-adjust) and the impact on the financial report
for the year end.
Tutorial solutions
2023/10/17 12:16 9.3 Tutorial: ACCT3600 Accounting and Auditing in Practice
https://canvas.sydney.edu.au/courses/53454/pages/9-dot-3-tutorial?module_item_id=1996138 4/4
Copyright © The University of Sydney. Unless otherwise indicated, 3rd party material has been reproduced and communicated to you
by or on behalf of the University of Sydney in accordance with section 113P of the Copyright Act 1968 (Act). The material in this
communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the
subject of copyright protection under the Act. Do not remove this notice.
Live streamed classes in this unit may be recorded to enable students to review the content. If you have concerns about this, please
visit our student guide (https://canvas.sydney.edu.au/courses/4901/pages/zoom) and contact the unit coordinator.
Guidance and model answers for the tutorial questions will be made available here
(https://canvas.sydney.edu.au/courses/53454/pages/9-dot-4-solutions) on Friday at 9am after the
completion of all tutorials.
https://canvas.sydney.edu.au/courses/53454/pages/9-dot-3-tutorial?module_item_id=1996138 1/4
9.3 Tutorial
This is a space to find resources and instructions relating to your
weekly tutorial.
This week's tutorial
This week, you will be working in your groups on the following exercises:
(Select ► to reveal)
Exercise 1
You are the auditor of Northern Forest Ltd for the year ended 30 June 2018. The audit of
Northern Forest was extremely difficult this year, as the company did not keep appropriate
books and records. As the accounting department was chronically understaffed, transactions
were not entered promptly and reconciliations not performed. In an attempt to sort out the
mess, a temporary accountant was employed; however, she was unable to even reconcile the
bank account at year end. You are not satisfied all transactions that occurred during the year
are reflected in the financial report.
Required: What Auditor's Opinion should be issued here? Should there be anything else
included in the Auditor's report?
Exercise 2
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.
2023/10/17 12:16 9.3 Tutorial: ACCT3600 Accounting and Auditing in Practice
https://canvas.sydney.edu.au/courses/53454/pages/9-dot-3-tutorial?module_item_id=1996138 2/4
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.
Required: What Auditor's Opinion should be issued here? Should there be anything else
included in the Auditor's report?
Exercise 3
You are the audit partner at Preston & Associates, a mid-tier audit firm. You are responsible for
the audits of the following three independent entities for the year ended 30 June 2018:
Required: What Auditor's Opinion should be issued for each of the below cases? Should
there be anything else included in the Auditor's report?
a) Helping Hand Ltd is a non-profit entity. You have discovered that it has not kept
substantiating vouchers or receipts for more than 65 per cent of its expenses, excluding
salaries and allowances.
b) Skyscraper Ltd is a building contractor with a varying workload. In order to compensate for
the irregularity of its contracted building projects, Skyscraper also purchases large vacant
blocks of land that it later subdivides for the construction of houses and units. Skyscraper then
sells these on its own account. Your analysis strongly suggests that the apportionment of costs
to houses and units sold has been kept low in order to boost profits. In your opinion, this has
resulted in the overvaluation of the unsold properties. The directors of the company do not
agree, and hold to their view that the stock of properties is correctly valued.
c) Big Event Ltd arranges for popular overseas entertainment artists to perform in Australia.
The band Eclipse was booked by Big Event to play in major cities across the country. Big
Event’s written contract required the company to pay the band in US dollars but, in order to
reduce costs, it did not hedge the amounts. Subsequent to year end, the Australian dollar fell
against the US dollar and a substantial loss relating to the band’s tour was predicted. The
management of Big Event tried unsuccessfully to renegotiate the band’s contract and has been
unable to obtain finance to cover the expected shortfall. Big Event has now cancelled the tour
and expects a substantial claim from Eclipse. It is clear to you, as the auditor, that Big Event
does not have the income, cash or other assets to sustain such a loss.
Exercise 4
2023/10/17 12:16 9.3 Tutorial: ACCT3600 Accounting and Auditing in Practice
https://canvas.sydney.edu.au/courses/53454/pages/9-dot-3-tutorial?module_item_id=1996138 3/4
You are the auditor of Clean Energy Ltd (CEL) for the year ended 30 June 2018. While
completing your audit and finalising your auditor’s report, you discover that the company has
incorrectly stated in the chairperson’s review of operations that CEL has complied with
environmental guidelines regarding its carbon emissions. Non-compliance with these
guidelines was investigated during the audit and it was noted (in a conversation with a junior
manager) that CEL’s emissions were significantly above compliance standards. There is
currently no financial implication for non-compliance, so no further action was taken. You
believe, however, that the statement in the annual report will affect the perception of readers of
the annual report regarding the company’s entitlement to future environmental incentives. This
information is likely to lead to a material adjustment of CEL’s share price.
Required: What action should the Auditor do in this situation? What Opinion should be
issued here? Should there be anything else included in the Auditor's report?
Additional exercise on Subsequent Events
George Blewett is the engagement partner for the financial report audit of Play Equipment Ltd
for the year ended 30 June 2018. The following material events or transactions have come to
George’s attention before he is scheduled to issue his report on 31 August 2018:
(a) On 14 July 2018, Play Equipment settled and paid a personal injury claim of a former
employee as a result of an accident that occurred in March 2017. The company has not
previously recorded a liability for the claim.
(b) On 17 July 2018, Play Equipment agreed to purchase for cash the outstanding shares of
Recreational Equipment Ltd. This acquisition is likely to double the sales volume of Play
Equipment.
(c) On 20 August 2018, the directors became aware of broken glass found in their pre-
packaged sandpits. This product had only been on sale for two weeks and had been
purchased directly from the manufacturer, Sandpit Ltd, an unrelated company in Thailand, one
week prior to being introduced to the public.
(d) On 3 August 2018, a plant owned by Play Equipment was damaged in a flood, resulting in
an uninsured loss of inventory.
Required: Identify the type of SE (adjust or non-adjust) and the impact on the financial report
for the year end.
Tutorial solutions
2023/10/17 12:16 9.3 Tutorial: ACCT3600 Accounting and Auditing in Practice
https://canvas.sydney.edu.au/courses/53454/pages/9-dot-3-tutorial?module_item_id=1996138 4/4
Copyright © The University of Sydney. Unless otherwise indicated, 3rd party material has been reproduced and communicated to you
by or on behalf of the University of Sydney in accordance with section 113P of the Copyright Act 1968 (Act). The material in this
communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the
subject of copyright protection under the Act. Do not remove this notice.
Live streamed classes in this unit may be recorded to enable students to review the content. If you have concerns about this, please
visit our student guide (https://canvas.sydney.edu.au/courses/4901/pages/zoom) and contact the unit coordinator.
Guidance and model answers for the tutorial questions will be made available here
(https://canvas.sydney.edu.au/courses/53454/pages/9-dot-4-solutions) on Friday at 9am after the
completion of all tutorials.
