You are the audit manager in charge of the audit of Hurricane, a limited liability company.

The
companys yearend is 31 December, and Hurricane has been a client for seven years. The
company purchases and resells fittings for ships including anchors, compasses, rudders, sails
etc. clients vary in size from small businesses making yachts to large companies maintain
large luxury cruise ships. No manufacturing takes place in Hurricane.
It is now early in 20X4. Information on the companys financial performance is available as follows:

Revenue
Cost of Sales
Gross profit
Administration costs
distributon costs
Net Profit

Non-current assets (at net book value)

Current assets
Inventory
Reveivables
Cash and bank
Total assets
Share capital
Accoumulated profits
Total shareholders' funds
Non-current liabilities
current liabilities

Other information
the industry that Hurricane trades in has seen moderate growth of 7% over the last year.

20X4
Forecast
Rs m
45,928
(37,998)
7,930
(4,994)
(2,500)
436

20X3
Actual
Rs m
40,825
(31,874)
8,951
(4,758)
(2,500)
1,693

20X4
Forecast
Rs m
3,600

20X3
Actual
Rs m
4,500

200
6,000
500
10,300

1,278
4,052
1,590
11,420

1,000
5,300
6,300
1,000
3,000
10,300

1,000
5,764
6,764
2,058
2,598
11,420

Non-current assets mainly relate to company premises for storing inventory. Ten delivery vehicles are owned with a net b
One of the directors purchased a yacht during the year.
Inventory is stored in ten different locations across the country, with your firm again having offices close to seven of thos
A computerized inventory control system was introduced in August this Year
Inventory balances are now obtainable directly from the computer system. The client does not intend to count inventory

Required:
Using the information provided above, prepare the audit strategy for Hurricane for the year ending 31 Decem

Difference
Amount
%
Rs m
5,103
(6,124)
(1,021)
(236)
(1,257)

(900)
(1,078)
1,948
(1,090)
(1,120)
(464)
(464)
(1,058)
402
(1,120)

12
19
-11
5
0
-74

-20
-84
48
-69
-10
0
-8
-7
-51
15
-10

Related Party Transaction

Arms Length Pricing

e owned with a net book value of Rs 30m

close to seven of those locations.

d to count inventory at the year end but rely instead on the computerized inventory control system.

ar ending 31 December 20X4.

Zakir Co sells garden sheds and furniture form 15 retail outlets. Sales are made to individuals, with income being in the form of cash and debit ca
All items purchased are delivered to the customer using Zaks own delivery vans; mos sheds are too big for individuals to transport in hteir own m
The directors of Zak indicate that the company has had a difficult year, but are pleased to present some acceptable results to the members.
The income statements for the last two financial years are shown below:
Income Statement
31 March 31 March
20X4
20X3
Rs m
Rs m
Revenue
7482
6364
Cost of sales
(3520)
(4253)
Gross Profit
3962
2111
Operating expenses
Administration
(1235)
(1320)
Selling and distribution
(981)
(689)
Interest payable
(101)
(105)
Investment income
145
profit/(loss) before tax
1790
(3)
Financial Statement extract
Cash and bank

253

(950)

12

Required:
As part of your risk assessment procedures for Zakir Co, identify and provide a possible explanation for unusual changes in the income statement

of cash and debit cards.

ansport in hteir own motor vehicles.
o the members.

he income statement.