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Darwin Pharmaceuticals Pty Ltd (DPPL) imports a number ofpharmaceutical products. In order to hedge its foreign currencytransactions, DPPL entered into a number of forward rate agreementsthis year. Prior to this time, DPPL had had little exposure toderivative instruments, but a series of bad experiences resultingfrom fluctuating exchange rates convinced the company that ahedging strategy was necessary. During planning for the audit ofDPPL, the company’s hedging arrangements were identified asinherently risky and increased testing was carried out in thisarea. A number of small errors were noted in accounting for hedgetransactions, but there did not appear to be any material errorsand as such, no adjustments were made. A review of the audit filesuggests that the errors noted were a result of inexperience andpoor controls in the area. While all of the errors were brought tothe attention of the treasurer, who is responsible for thecompany’s hedging strategy, no further action has been taken todate.REQUIRED: Outline what further action the auditor should take inresponse to the errors and control weaknesses identified. Justifyyour response.