This is first year that audit team audit

Sunflower. Theres risk that the audit

team might not be able understand the
nature of business of supermarket and
hence not competence in auditing
result in not being able to detect
material misstatement in FS.
Sunflower had spent $1.6m in
refurbishing its supermarket and central
warehouse has been extended. The
$1.6m contain revenue and capital
expenditure where Sunflower might
incorrectly capitalize or expensed off in
the financial statement. As a result, the
PPE & repair cost might be misstated.
A warehouse had been disposed of at a
profit. There is risk that Sunflower may
make error in calculation the profit on
disposal and hence the profit in FS
might overstated. Besides that, the
warehouse might not remove from PPE
listing and hence PPE overstated.
The inventory count at the was
performed at the central warehouse
and 25 supermarket on 31 December.
Its impossible for auditor to attained on
all count in 25 Supermarket. Therefore,
auditor are unable to obtain sufficient
evidence on the valuation of the
inventory. Thus inventory might
overstated or understated.
The inventory is valued at selling price
less an average profit margin. This
method of valuation is acceptable
under IAS 2 if it is close the cost. There
is risk that the cost assigned might
differ much compare to the actual cost.
Thus the inventory may over or
understated.

The audit team need to be consist of

senior that had experienced in dealing
with supermarket and additional time
should to be allocated to the audit team
to understand Sunflowers business.

Auditor should obtain the analysis of

cost and trace to the description
invoices to determine the nature of the
expenses.
After the nature of the expenses had
established, compare with general
ledger and financial statement to
ensure they are being classified
correctly as asset or repair cost.
Auditor should recalculate the profit on
disposal based on proceed received in
bank statement and the carrying
amount of the warehouse as at the date
of disposal. The auditor should ensure
the warehouse had been removed from
PPE listing.
Auditor must attain the inventory count
on those central market to confirm on
the existence on most of the inventory.
Besides that, he/she should attain on
those supermarkets that has historical
error on inventory count. Finally,
inspect on any counting error as to the
inventory record and make sure it is
being resolved.
Auditor should obtain and compare the
invoice unit price and cost assigned to
each product to determine any
significant difference that require
adjustment.