question archive Marcy Jane, an Audit Supervisor of Lybrand Auditing Company, is currently planning the audit of an existing client Integrated Pharmaceutical Company (Integrated), whose year-end was 30 March 2020
Marcy Jane, an Audit Supervisor of Lybrand Auditing Company, is currently planning the audit of an existing client Integrated Pharmaceutical Company (Integrated), whose year-end was 30 March 2020
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Marcy Jane, an Audit Supervisor of Lybrand Auditing Company, is currently planning the audit of an existing client Integrated Pharmaceutical Company (Integrated), whose year-end was 30 March 2020. Integrated specialises in making asthma medication and supplies same to the local and international market. The draft financial statements show revenue of $150.8 million and profit before tax of $20.9 million.
Integrated's previous Finance Director left the company in December 2019, after it was discovered that he had been claiming fraudulent expenses from the company for a significant period of time. A new Finance Director was appointed in January 2020, who was previously a Financial Controller of a bank and she has expressed surprise that Lybrand Auditing Company had not uncovered the fraud during last year's audit.
During the year, Integrated has spent $3.5 million on developing several new herbal products in response to the demand from the customers. These projects are at different stages of development and the draft financial statements show the full amount of
$4.8 million within intangible assets. In order to fund this development, $6.5 million was borrowed from the bank and is due for repayment over a five-year period. The bank has registered a lien on the assets of the company, as a part of the security for the loan.
The new Finance Director has informed the audit partner that since the year-end, there has been an increased number of sales returns and that in the month of May over
$1.5 million of goods sold in April were returned.
Lybrand & Company attended the year-end inventory count at Integrated's warehouse.
The Auditor present, raised concerns that during the count, there were movements of goods in and out the warehouse and this process did not seem well controlled.
During the year, a review of plant and equipment in the factory was undertaken and surplus plant was sold, resulting in a profit on disposal of $2.5 million.
required;
State integrated's responsibility in relation to the prevention and detection of fraud and error. (13 marks)
