This paper "Fraud And Errors of the Company’s Financial Statement" focuses on audit risk - the risk that the auditor expresses an inappropriate opinion because of intentional miscalculations like fraud and errors of the company’s financial statement. Identifying and assessing this risk is crucial in the audit process. …
Finally, the detection risk which analyses the risk that auditors’ procedures would fail to detect a material error (Hall, 2013, pp. 691).
Accsys Technology PLC is a chemical technology group quoted on the Alternative Investment Market (AIM) on the UK stock exchange. It develops and commercialises a range of transformational technologies that are based on the acetylating of wooden elements, such as particles, wood chips and fibres, and solid use for us as a leading, environmentally sustainable, construction materials. Analysis of the company’s most recent financial statements indicates some anomalies that need further investigations. These areas include revenue, gross profits, and remuneration whose balances show a large positive difference in 2014 as compared to 2013.
Material misstatements in the financial statements are often as a result of an overstatement or understatement of revenues. It is crucial for auditors to presume that there are risks in revenue recognition. From the quantitative analysis (Appendix 1) it is clear that the company’s total revenue had materially increased by 78% in 2014 as compared to that reported in the year 2013. According to the financial director, the increase had been attributed to a 61% increase in Acoya revenue because of an increase in sales to Medite. This increase in sales to Medite is because the company had finished its built up stock which it was still utilizing earlier. There was also an increase in license income from Solvay and other revenues such as the sale of acetic acid. According to the financial statements, the increase in total revenue was as a result of an increase in revenues in the UK and Ireland by 183.70% (Appendix 2). This was further explained by an increase in revenue generated from one customer who represented 43% of this revenue and exceeded 10% of the group’s revenue. This area creates an audit risk because in 2013 the revenue generated from a customer did not exceed 10% of the Group’s revenue. ...
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