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ACC331: Printer Solutions Ltd,- Planning, Analytics & Risk- Financial Reports Assignment Help
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Internal Code: 1HJDF
Additional Background Information
In an attempt to expand into overseas markets, Printer Solutions automated many of its operations in 2016 with the purchase of some highly sophisticated plant and machinery. The new plant and machinery was financed with a secured variable loan of $100,000 and a bank overdraft facility.
The company purchases the components that make up the printers from a variety of local and overseas suppliers. Currently, 85% of Printer Solutions sales are to one electrical discount chain store, and the company has plans to broaden its sales base in both the local and overseas markets. While local sales have increased, the company has had mixed results with sales to overseas markets. Further expansion of the company's sales base, especially overseas, revolves around the development and production of a state of the art printer that will be tailored to meet the needs of the top end of the market. In addition, a new computerised ordering system is being developed.
Plans are well underway for the new range of printers and the computer system upgrade. The company’s loan facility has been increased to $150,000 over the past two years to cover some of these expenses. Other funding has come from cash flow. However, the development will require a significant amount of additional money. The directors hope this money will come via a new public issue of shares planned for later this year and promises of loans and other forms of assistance from business acquaintances of the CEO, Mr Peter Andrews.
Required:
(a) Analyse the financials of Printer Solutions Ltd. Include a simple comparison of the movement in the accounts between 2016 and 2017, a trend analysis, and the profitability, liquidity, solvency and efficiency ratios for the last three years (2017, 2016 and 2015).
(b) With reference to each of the ratio areas, the other analysis and the background information provided in the question, explain why you perceive there are going concern issues for Printer Solutions Ltd.
(c) From your analysis of the company, identify four account balances that could potentially be materially misstated and justify each choice.
(d) For each of the accounts/areas in (c), identify the two assertions of primary interest to you and justify your choice.
Question 2: Topics 5 & 6 (Internal control and tests of control)
You are engaged in your first audit of VIPet Pty Ltd (VIPet) for the year ended 30 June 2017. The Managing Director is Matthew Stanton, a qualified veterinarian, and the company employs seven permanent staff. The permanent staff consists of two permanent veterinarians, three veterinarian assistants; a receptionist, an office assistant/typist and a bookkeeper. In July 2016 VIPet commenced providing “on farm” veterinarian services for small hobby farms, due to a large number of small holdings in the area. The company has 250 clients using this service within a 60 kilometre radius and employs an additional five veterinarians on an hourly basis to visit the client farms. The casual veterinarians submit weekly time reports, which include the customer's name and the time devoted to each customer. Time charges for emergency visits are shown separately from regular monthly visits on the reports.
As part of your evaluation of the new service you note the following:
1. VIPet requires customers to sign annual contracts which are pre-numbered and prepared in duplicate. The original is filed in numerical order by contract anniversary date, and the copy is given to the customer. The contract entitles the customer to one routine veterinarian service each month. However, the contract does not include emergency visits, which are billed separately.
2. Fees for monthly services are payable in advance – quarterly, half-yearly or yearly - and recorded on the books as "income from services" when the cash is received. All payments are made by cheque and are received by post.
3. Pre-numbered invoices for contract renewals are prepared in triplicate from information in the contract file. The original invoice is sent to the customer 30 days before the due date of payment, the duplicate copy is filled chronologically by due date, and the triplicate copy is filed alphabetically by customer surname. If payment is not received within ten days of the due date, a cancellation notice is sent to the customer, and a copy of the notice is attached to the customer’s contract.
4. Matthew Stanton approves all cancellations and reinstatements of contracts.
5. The bookkeeper notifies the veterinarians of all contract cancellations and reinstatements and requires the veterinarians to acknowledge notification of cancellation.
6. Pre-numbered invoices for emergency services are prepared weekly from the information shown on the veterinarians "time reports. The customers are billed at 300 percent of the veterinarian's hourly rate.
These invoices, prepared in triplicate and distributed as outlined above, are recorded on the books as
"income for services" at the billing date. Payment is due 30 days after the invoice date.
7. All remittances are received by the office assistant/typist, who prepares a daily list of cheques received and stamps a restrictive endorsement on the cheques. A copy of the list is forwarded with the cheques to the bookkeeper who posts the date and amount of each cheque received on the copies of the invoices in both the alphabetical and the chronological files. After posting, the copy of the invoice is transferred from the chronological file to the daily cash receipts binder, which serves as a subsidiary record for the cash receipts book. The bookkeeper totals the amounts of all the remittances received, posts this total to the cash receipts book and attaches the daily remittance tapes to the paid invoices in the daily cash receipts binder.
8. The bookkeeper prepares a daily bank deposit slip and compares the total with the total amount shown on the daily remittance tapes. All remittances are deposited in the bank the day they are received.
9. The financial report is prepared on an accrual basis.
Required:
(a) Identify and explain four (4) key controls relating to revenue and cash collection. Cash receipts from sources other than these regular visitations and emergency call-outs need not be considered.
(b) For the controls identified in (a), explain the tests of controls you would use to examine the revenue from services account for the year ended 30 June 2017. Justify your choices.
(c) Identify any concerns that you would have about the controls that might cause you place less reliance on the controls, even if the test of controls appear adequate.
Question 3: Topic 6 (IT Controls)
You are preparing for the audit of your client NSW Rural Heath, for the financial year ended 31 December 2017. The health service implemented a new payroll system and you have noted the following:
1. The new payroll application is more complex than the old system, but its reporting function provides more detail. For example, the new application calculates leave, superannuation, payroll tax and work cover expenses, as well as the corresponding accruals.
2. Due to the brief time available to implement the system, the previous application ceased operation on 31 December 2016 and the new application went live on 1 January 2017 without running parallel with the previous application. Staff training and testing of the new application was limited.
3. Access to the master files is restricted to the payroll supervisor and her deputy. Access to transaction files is restricted to payroll staff who are responsible for the processing of fortnightly and monthly pay.
Prior to the introduction of the new payroll system, the payroll master and transaction files were kept in a separate database from the general ledger. At the end of each month, the IT staff imported transaction data from the payroll data base into the general ledger. Management decided to upgrade the existing accounting system to include a payroll system due to the frequent problems encountered by IT staff when importing data into the general ledger.
Required:
(a) Explain two relevant concerns you may have about the payroll application’s implementation.
(b) Identify and describe one application control that could be applied to salaries and wages expense to ensure the following:
i. The occurrence of the expense transactions.
ii. The accuracy of the expense transactions.
(c) Describe in detail an appropriate test of control that you would use to satisfy yourself about the effectiveness of the controls identified in (c).
Financial Reports Assignment Help:
Task: Question 1: Topic 3 & 4 (Planning, analytics and risk assessment) You are the auditor of Printer Solutions Ltd, a manufacturer of colour printers. You have scrutinised the financial reports of the company and are concerned about its future as a "going concern". The summarised financial reports for the past three years plus the unaudited draft accounts for the current year are shown below.
Additional Background Information
In an attempt to expand into overseas markets, Printer Solutions automated many of its operations in 2016 with the purchase of some highly sophisticated plant and machinery. The new plant and machinery was financed with a secured variable loan of $100,000 and a bank overdraft facility.
The company purchases the components that make up the printers from a variety of local and overseas suppliers. Currently, 85% of Printer Solutions sales are to one electrical discount chain store, and the company has plans to broaden its sales base in both the local and overseas markets. While local sales have increased, the company has had mixed results with sales to overseas markets. Further expansion of the company's sales base, especially overseas, revolves around the development and production of a state of the art printer that will be tailored to meet the needs of the top end of the market. In addition, a new computerised ordering system is being developed.
Plans are well underway for the new range of printers and the computer system upgrade. The company’s loan facility has been increased to $150,000 over the past two years to cover some of these expenses. Other funding has come from cash flow. However, the development will require a significant amount of additional money. The directors hope this money will come via a new public issue of shares planned for later this year and promises of loans and other forms of assistance from business acquaintances of the CEO, Mr Peter Andrews.
Required:
(a) Analyse the financials of Printer Solutions Ltd. Include a simple comparison of the movement in the accounts between 2016 and 2017, a trend analysis, and the profitability, liquidity, solvency and efficiency ratios for the last three years (2017, 2016 and 2015).
(b) With reference to each of the ratio areas, the other analysis and the background information provided in the question, explain why you perceive there are going concern issues for Printer Solutions Ltd.
(c) From your analysis of the company, identify four account balances that could potentially be materially misstated and justify each choice.
(d) For each of the accounts/areas in (c), identify the two assertions of primary interest to you and justify your choice.
Question 2: Topics 5 & 6 (Internal control and tests of control)
You are engaged in your first audit of VIPet Pty Ltd (VIPet) for the year ended 30 June 2017. The Managing Director is Matthew Stanton, a qualified veterinarian, and the company employs seven permanent staff. The permanent staff consists of two permanent veterinarians, three veterinarian assistants; a receptionist, an office assistant/typist and a bookkeeper. In July 2016 VIPet commenced providing “on farm” veterinarian services for small hobby farms, due to a large number of small holdings in the area. The company has 250 clients using this service within a 60 kilometre radius and employs an additional five veterinarians on an hourly basis to visit the client farms. The casual veterinarians submit weekly time reports, which include the customer's name and the time devoted to each customer. Time charges for emergency visits are shown separately from regular monthly visits on the reports.
As part of your evaluation of the new service you note the following:
1. VIPet requires customers to sign annual contracts which are pre-numbered and prepared in duplicate. The original is filed in numerical order by contract anniversary date, and the copy is given to the customer. The contract entitles the customer to one routine veterinarian service each month. However, the contract does not include emergency visits, which are billed separately.
2. Fees for monthly services are payable in advance – quarterly, half-yearly or yearly - and recorded on the books as "income from services" when the cash is received. All payments are made by cheque and are received by post.
3. Pre-numbered invoices for contract renewals are prepared in triplicate from information in the contract file. The original invoice is sent to the customer 30 days before the due date of payment, the duplicate copy is filled chronologically by due date, and the triplicate copy is filed alphabetically by customer surname. If payment is not received within ten days of the due date, a cancellation notice is sent to the customer, and a copy of the notice is attached to the customer’s contract.
4. Matthew Stanton approves all cancellations and reinstatements of contracts.
5. The bookkeeper notifies the veterinarians of all contract cancellations and reinstatements and requires the veterinarians to acknowledge notification of cancellation.
6. Pre-numbered invoices for emergency services are prepared weekly from the information shown on the veterinarians "time reports. The customers are billed at 300 percent of the veterinarian's hourly rate.
These invoices, prepared in triplicate and distributed as outlined above, are recorded on the books as
"income for services" at the billing date. Payment is due 30 days after the invoice date.
7. All remittances are received by the office assistant/typist, who prepares a daily list of cheques received and stamps a restrictive endorsement on the cheques. A copy of the list is forwarded with the cheques to the bookkeeper who posts the date and amount of each cheque received on the copies of the invoices in both the alphabetical and the chronological files. After posting, the copy of the invoice is transferred from the chronological file to the daily cash receipts binder, which serves as a subsidiary record for the cash receipts book. The bookkeeper totals the amounts of all the remittances received, posts this total to the cash receipts book and attaches the daily remittance tapes to the paid invoices in the daily cash receipts binder.
8. The bookkeeper prepares a daily bank deposit slip and compares the total with the total amount shown on the daily remittance tapes. All remittances are deposited in the bank the day they are received.
9. The financial report is prepared on an accrual basis.
Required:
(a) Identify and explain four (4) key controls relating to revenue and cash collection. Cash receipts from sources other than these regular visitations and emergency call-outs need not be considered.
(b) For the controls identified in (a), explain the tests of controls you would use to examine the revenue from services account for the year ended 30 June 2017. Justify your choices.
(c) Identify any concerns that you would have about the controls that might cause you place less reliance on the controls, even if the test of controls appear adequate.
Question 3: Topic 6 (IT Controls)
You are preparing for the audit of your client NSW Rural Heath, for the financial year ended 31 December 2017. The health service implemented a new payroll system and you have noted the following:
1. The new payroll application is more complex than the old system, but its reporting function provides more detail. For example, the new application calculates leave, superannuation, payroll tax and work cover expenses, as well as the corresponding accruals.
2. Due to the brief time available to implement the system, the previous application ceased operation on 31 December 2016 and the new application went live on 1 January 2017 without running parallel with the previous application. Staff training and testing of the new application was limited.
3. Access to the master files is restricted to the payroll supervisor and her deputy. Access to transaction files is restricted to payroll staff who are responsible for the processing of fortnightly and monthly pay.
Prior to the introduction of the new payroll system, the payroll master and transaction files were kept in a separate database from the general ledger. At the end of each month, the IT staff imported transaction data from the payroll data base into the general ledger. Management decided to upgrade the existing accounting system to include a payroll system due to the frequent problems encountered by IT staff when importing data into the general ledger.
Required:
(a) Explain two relevant concerns you may have about the payroll application’s implementation.
(b) Identify and describe one application control that could be applied to salaries and wages expense to ensure the following:
i. The occurrence of the expense transactions.
ii. The accuracy of the expense transactions.
(c) Describe in detail an appropriate test of control that you would use to satisfy yourself about the effectiveness of the controls identified in (c).