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- The Environmental Protection Agency (EPA) is in the process of investigating a possible water contamination issue at the manufacturing facility of Northwest Forest Products. The EPA has not yet proposed a penalty assessment. Management feels an assessment is reasonably possible, and if an assessment is made, an unfavorable settlement is estimated between $20 and $30 million. How should Northwest Forest Products report this situation in its current financial statements?Contract Management and Administration Case Analysis: Auditing Agencies Unearth Procurement Scam Two government auditing agencies have unearthed serious irregularities in procurement of relief items worth Shs10b. Two forensic audits by the Office of the Auditor General (OAG) and the Public Procurement and Disposal of Assets (PPDA), dated September 7, 2021 and April 12, 2022, respectively, put senior officials on the spot for allegedly causing financial losses to the taxpayer. Copies of the findings seen by this newspaper point to alleged forgeries, collusion between some officials and suppliers, and failure to adhere to key critical procurement regulations. Our analysis of a cache of official documents of the contentious procurements, which dovetails with findings by government auditors, shows that contracted companies supplied items without a contract specifying quality, leading to delivery of substandard items. The auditors found some officials culpable of undertaking contracts…The Company believes that there are no compliance issues associated with applicable environmental laws and regulations that would have a material adverse effect on the Company. The Company is also remediating environmental contamination resulting from past industrial activity at certain of its sites. Expenditures for remediation and environmental liabilities were $20 million in 2013, $14 million in 2012 and $25 million in 2011, and are estimated at $117 million in the aggregate for the years 2014 through 2018. These amounts do not consider potential recoveries from other parties. The Company has taken an active role in identifying and providing for these costs and, in management's opinion, the liabilities for all environmental matters, which are probable and reasonably estimable, have been accrued and totaled $213 million at December 31, 2013. Although it is not possible to predict with certainty the outcome of these environmental matters, or the ultimate costs of remediation,…
- You were assigned to audit the financial statements of Swansea Corporation as at and for the year ended December 31, 2021. Your senior asked you to draft a memo on materiality and tolerable error for your client. Swansea Corporation has incurred substantial net losses due to COVID-19 pandemic. Up to 2019, it has been profitable. Which of the following is least likely to be your starting point in computing materiality? Group of answer choices Normalized net income Net loss Total assets Normalized revenuePart B: In your audit of Melbourne Ltd for the calendar year 2021, you found some matters that you believe represent possible adjustments to the company's books. As a result, you list the following 3 items considered material for review by the engagement manager: Item 1: The company has not established a reserve for the obsolescence of inventories, Your test indicated that such as $30,000 reserve is appropriate under circumstances. Item 2: Your review of the electricity bill indicates that it is understated by 24,000. Item 3: Bonus shares were issued on 1 September 2021 in the amount of $80,000 of its ordinary shares, payable 1 January 2022 to the key shareholders on record as 30 September 2021. Required: 1. Explain the difference between the two types of subsequent events. 2. For each item, classify which type of subsequent event it belongs to.Problem 1. You were engaged for the first time to audit the FS of Bebeko Corporation for the periodended December 31, 2020. The company started its operation in 2018. In reviewing the books, theauditor discovered that certain adjustments had either been overlook or improperly recorded at theend of years to 2020. Omissions and other failures for each year are summarized below:
- Which one of the following would not be valid grounds for a provision? A. A company has always cleaned up any environmental contamination caused by its operations, but is not legally obliged to do so. B. A company is leasing an office building for which it has no further use. However, it is tied into the lease for another year. C. A company is closing down a division. The Board has prepared detailed closure plans which have been communicated to customers and employees. D. A company has acquired a machine which requires a major overhaul every three years. The cost of the first overhaul is reliably estimated at GHS120,000Research Problem 1. Gray Chemical Company manufactured pesticides that were toxic. Over the course of several years, the toxic waste contaminated the air and water around the company's plant. Several employees suffered toxic poisoning, and the Environmental Protection Agency cited the company for violations. In court, the judge found Gray guilty and imposed fines of $15 million. The company voluntarily set up a charitable fund for the purpose of bettering the environment and funded it with $8 million. The company incurred legal expenses in setting up the foundation and defending itself in court. The court reduced the fine from $15 million to $7 million. Gray deducted the $8 million paid to the foundation and the legal expenses incurred. The IRS disallowed both deductions on the grounds that the payment was, in fact, a fine and in violation of public policy. Gray's president, Ted Jones, has contacted you regarding the deductibility of the $7 million fine, the $8 million payment to the…Problem You are the lead partner overseeing the audit for Camo Ltd, a privately owned company.The completion of the audit report is pending for the income year 2020 and you have noted severalsituations with possible actions.The situations are as follows: 1. Camo Corporation carries its property, plant, and equipment accounts at currentmarket values. Current market values exceed historical cost by a highly materialamount, and the effects are pervasive throughout the financial statements. 2. Management of Camo Corporation refuses to allow you to observe, or make,any counts of inventory. The recorded book value of inventory is highlymaterial. 3. You were unable to confirm accounts receivable with Camo’s customers.However, because of detailed sales and cash receipts records, you were able toperform reliable alternative audit procedures. 4. One week before the end of fieldwork, you discover that the audit manager onthe Camo engagement owns a material amount of Camo’s common stock. 5. You…
- As the recently appointed auditor for Bramble Corporation, you have been asked to examine selected accounts before the 6-month financial statements of June 30, 2020, are prepared. The controller for Bramble Corporation mentions that only one account is kept for intangible assets. The account is shown below. Intangible Assets Debit Credit Balance Jan. 4 Research and development costs 932,000 932,000 Jan. 5 Legal costs to obtain patent 72,480 1,004,480 Jan. 31 Payment of 7 months' rent on property leased by Bramble 85,400 1,089,880 Feb. 11 Premium on common stock 232,000 857,880 March 31 Unamortized bond discount on bonds due March 31, 2040 88,800 946,680 April 30 Promotional expenses related to start-up of business 216,800 1,163,480 June 30 Operating losses for first 6 months 247,500 1,410,980 Prepare the entries necessary to correct this account. Assume that the patent has a useful life of 10 years. (Credit account titles are automatically indented when amount is entered. Do not indent…Problem 1. You were engaged for the first time to audit the FS of Bebeko Corporation for the period ended December 31, 2020. The company started its operation in 2018. In reviewing the books, the auditor discovered that certain adjustments had either been overlook or improperly recorded at the end of years to 2020. Omissions and other failures for each year are summarized below: December 31 2018 2019 2020 1. Omissions of the following year-end accruals/deferrals: a. Accrued utilities expense b. Accrued interest income c. Prepaid rent expense d. Unearned royalty income |2. Delivery of merchandise at year-end to customers, recorded as sales upon collection the following year. 3. Receipt of merchandise at year-end from suppliers, recorded as purchases upon payment the following year. 4. Cash received from customers at year-end, recorded as sales deliveries yet to be made the following year. In the year of collection, corresponding 5000 7000 6000 2000 4000 3000 2000 1000 8000 3000 5000…1. Biological assets, bearer plants, and agricultural produce are the three focal points of the scope ofIAS 41. Briefly discuss and compare each. 2. Dupont Corp. recently discontinued operations on one of its four branches. The branch is nowconducting a clearance sale. The fixed assets in the discontinued branch are now being offered forsale, and a buyer has been identified. The sale can take place within a year.Despite all this, the management insists on presenting all the fixed assets, including those thatbelong to the disposal group, as PPE as it would give an impression of large manufacturingcapacity. They are not in favor of presenting any amount of revenues from discontinuedoperations. Explain to them why these assets are no longer PPE and should be separated as assets-held-for-sale and why income on discontinued operation should be separated from continuing operation. 3. Apart from the benefits required by legislation, what benefit can a company expect from offeringadditional…