ICAN 2022 Audit and Assurance | Mixed

Quality Plastic Manufacturing Company Limited has been operating for about a decade. The company is into the production of plastic chairs, bowls, tables and other related products. It was awarded a contract to produce chairs for a pentecostal church that has branches across the 36 states of the country, including Abuja. The church has its convention ground that occupies large hectares of land along Lagos-Abeokuta expressway. The number of chairs which are in millions would be produced and delivered to the headquarters of the church from where they would be distributed to all the branches and the convention ground. Given the fact that this contract would increase the fortune of the company, Ogbuefi Okafor, the Chairman of the company, saw the need for the company to grow bigger in the future and would require more funding to finance the expansion. He discussed this with his bank manager who advised him to approach a consultant that would prepare a feasibility study for him on the expansion. Though he agreed with the bank manager, he however now feels that there is need to convert the accounting system of the company from manual to computer-based as a result of the level of expansion envisaged. As a first step before conversion to computer based system, the company set up an internal control system, including an internal audit department. The internal audit department is headed by a partly qualified accountant who has passed the skills level of ICAN Professional Examinations but has a very wide experience in internal audit. Your firm has been the auditors of the company for the past five years.

Garkuwa Nigeria Limited is a newly incorporated company that deals in building materials. The Managing Director is engaged on full time basis in the running of the business. Other employees are: the accounts officer who keeps the books, the cashier and two labourers. The company does not maintain inventory records and inventory is a material item in the financial statements. The Managing Director wants you to advise him on inventory count procedures with a view to ensuring that the methods used at arriving at the inventory value will be satisfactory. The first financial statements of the company are to be made up for the 12 months to December 31, 2021.

In the course of carrying out their assignments, the auditors are usually faced with threats created by a broad range of circumstances.

Materiality is a fundamental concept in both auditing and accounting. It reflects the fact that the users of financial statements find it useful even if they are not 100% accurate.