Sunny Best is the engagement partner for the financial report audit of BigMac Ltd for...
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Accounting
Sunny Best is the engagement partner for the financial report audit of BigMac Ltd for the year ended 31 December, 2021. The following material events or transactions have come to Sunny Bests attention before he is scheduled to issue his report on 28 February,
i. On 2 January, 2022, BigMac Ltd received a shipment of raw materials from Singapore. The materials had been ordered in October 2021, and shipped FOB shipping point in November
ii. On 10 January, 2022, the company settled and paid a personal injury claim of a former employee as the result of an accident that occurred in March 2015. The company had not previously recorded a liability for the claim.
iii. On 23 January, 2022, the company agreed to purchase for cash the outstanding shares of Danish Electrical Ltd. The acquisition is likely to double the sales volume of BigMac Ltd
iv. On 1 February, 2022, a plant owned by BigMac Ltd was damaged by a flood, resulting in an uninsured loss of inventory.
Required:
For each of the above events or transactions, discuss audit procedures that should have brought the item to the auditors attention, and indicate the treatment required in the financial report. Give reasons for your decision.
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