Planning the Audit of Global Communication Bhd for the Year Ending 30 June 2020

Audit Program for Cash and Cash at Bank

You are an audit supervisor of ICSKK Public Accountants, an audit firm based in Kota Kinabalu, Sabah. You are currently planning the audit of Global Communication Bhd, a public listed company, for the year ending 30 June 2020. The company sells only 1 product that is the Scan 1000x which is supplied to government and private hospitals around Malaysia. Global Communication Bhd forecast profit before tax is RM26.9m and total assets are RM81.1m for the financial year ending 30 June 2020.

During the current financial year, Global Communication Bhd has decided to close a current account with Asia Bank Bhd. Global Communication Bhd subsequently opened a new current account and a new fixed deposit account with Borneo Bank Bhd. Global Communication Bhd has other current account with Kinabalu Bank Bhd which is still in use. Global Communication Bhd has closing stocks of 8 units of Scan 1000x on its inventory record. A government order of 15 units has been received on 15 June 2020 to be delivered within 90 days. Global Communication Bhd has placed an order of 20 units of Scan 1000x from supplier on 16 June 2020 and are currently en-route to Port of Kota Kinabalu. Physical stock take carried out by members of ICSKK Public Acccountants has physically counted 3 units and recorded their details as below. Global Communication Bhd informs that the remaining 5 units was in transportation from port to bonded-warehouse as the import duty and taxes was not paid. Due to client-imposed circumstances, members of ICSKK Public Accountants are unable to verify the existence of the remaining 5 units. 

Global Communication Bhd has accounts receivable as of year 30 June 2020 end is consists of just Ministry of Health Malaysia. The amount outstanding is RM22,307,800 and Global Communication Bhd expects to receive the payment from Ministry of Health in July 2020. The sales of 15 units of Scan 1000x has not been recorded as no delivery of Scan 1000x has been carried out.

As Global Communication Bhd is in the process of application to transfer of listing status to the main board of Bursa Malaysia, The Chief Finance Officer (CFO) has requested the audit team to fasten the auditing process in shorter time. This mainly because the company wishes to release the financial result to public earlier compared to last year.The CEO also has informed ICSKK Public Accountants that one of the directors has just submitted resignation letter. The CEO has proposed that one of the director of ICSKK Public Accountants be appointed as a director of Global Communication Bhd. The CEO also requested ICSKK Public Accountants to assist in recruitment of key personnel in the expansion of Global Communication Bhd, namely the position of Chief Technical Officer (CTO), Chief Operating Officer (COO) and Chief Compliance Officer (CCO). 

Besides, ICSKK Public Accountants also provides taxation advice services for Global Communication Bhd in the form of tax return preparation along with some tax planning advice. The CFO has recommended to the audit committee of Global Communication Bhd that this year’s audit fee should be based on the company’s profit before tax. At today’s date, 30% of last year’s audit fee is still outstanding and was due to be paid four months ago.

a) Prepare the audit program for each of the following audit area.

(i) Cash and Cash at bank
(ii) Accounts Receivable
(iii)Inventories (45 marks)

b) Describe the professional ethics and conduct of ICSKK Public Accountants in the above scenario. (15 marks)

c) Explain in detail the violation committed by ICSKK Public Accountants with regards to the appointment of director to Global Communication Bhd. (15 marks)

d) Comment on the appointment of ICSKK Public Accountants as the auditor and tax advisor of Global Communication Bhd for the year ending 30 June 2020. (10 marks)

e) Draft an audit report based on the audit findings stated above.  (15 marks)