 the directors reviewed the useful lives and
depreciation rates of all classes of plant and
machinery. This resulted in an overall increase
in the asset lives and a reduction in the
depreciation charge for the year.
There is a risk that assets are overstated and
depreciation expense is understated, because
IAS 16 requires to increase the useful life of
asset only when its genuine.
 The finance director has informed the auditor
that October and November both bank
reconciliations have unreconciled differences
which he claimed to be immaterial but there is
a risk that if unreconciled items not fully
reconciled the bank balances may end up being
over or understated.
 Inventory is held in five warehouses and on 28
and 29 December a full inventory count will be
held with adjustments for movements to the
year end due to lack of staff on 31 December.
There is a risk that inventory might be over or
understated because there is possibility of
movement in inventory after the inventory
count.
 In October, there was a fire in one of the
warehouses; inventory of $0·9 million was
damaged and this has been written down to its
scrap value of $0·2 million. There is a risk that
inventory might be overstated and scrap value
overvalued if this scrap remains unsold at the
year end.
 Venus is still waiting to hear from the
insurance company with regards to this claim
for $0.7 difference, but has included the
insurance proceeds within the statement of
profit or loss and the statement of financial
position. With no reply yet from the insurance
 Discuss with the management the
rationale for increasing the useful life.
And compare the assets which have
increase in their lives with how often
these assets are replaced to confirm their
useful life.
 Discuss this issue with finance director
and request to reconcile
 Review of inventory count and
corresponding document to confirm the
proper adjustment of moving items.
Detail inventory cut off testing after year
end to ensure inventory is properly
recorded to its relevant accounting year.
 Enquire from the management the basis
for scrap of 0.2 million. Review if any
scrap inventory sold during pre or post
year end and on what amount to assess
whether the attributed scrap value is
reasonable. And if not sold then discuss
with management to further write down
of inventory.
 Enquire from management that if they
had received the reply from insurance
provider before the year end then this
treatment is right and if the reply was not
received then request to remove the $0.7
million from the profit and recieveables.
 providers, the recieveables and profit are  Confirm the timetable from the directors
overstated because according to IAS 38 and if the time needs to be reduced then
contingent assets should only be recognized consideration should be given to interim
when they are virtually certain. audit in the late December oy early
 In order to finalise the bonus figures, the January to reduce the pressure of time
finance director of Venus would like the audit during final audit.
to commence earlier so that the final results
are available earlier this year. There is a
detection risk because the time duration will
be decreased in order to provide results earlier
so the sample size might needed to be reduce
and less testing will be performed due to less
time.