During the Year audit of Alpha Co a shipping company, the auditor read an article in a trade
publication that discussed the following industry issues:
Since December of Year the shipping industry has experienced significant pricing
challenges due to the rising price of fuel. Fuel suppliers to the shipping industry no longer grant
the traditional level of discounts. Case in point, Ship Go Fuel Co has refused to renew its
contracts with all of its customers at old prices, forcing the companies tc renegotiate. Shippers
are reluctant to pass these costs on to customers because they may not remain competitive.
More than ever, shippers have to rely on volume to maintain profit margins. Compounding this
problem, the current state of the credit market makes it challenging for shippers to obtain
financing for new vessels
The auditor noted that Ship Go Fuel Co is a major fuel supplier for Alpha Co
As highlighted by the selected financial information in the exhibit above, Alpha Cos financial
information does not appear to reflect the issues described in the quotation above.
The audit plan focuses on the increases in accounts receivable, deferred assets, and revenues,
as well as the impact of fuel expenses.
For each of the independent situations below:
