Cas 315

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This case has been adapted from the textbook (6th edition) Discussion Case Question 8-6 and Discussion Case 6-8: You are the audit senior and your manager has asked that you complete the audit planning for TWO upcoming audits --- Equality Coffee Roasters Limited (ERC) and Office Moving and Storage Limited (OMS). Both clients have a December 31, 2013 year end. Below are some notes your manager has made on each client and has provided to you to assist with the planning. It is now the beginning of January 2014. Evaluate each client separately.

Equality Coffee Roasters Limited
* The company has been in existence for 5 years and is in the business of obtaining coffee beans from around the world under a fair trade policy, roasting the beans locally and selling them to coffee shops in Ontario. Most of their sales are in the urban centres of the province. ECR's business involves obtaining raw coffee beans from coffee producing countries around the world. ECR business model is to only purchase coffee from certified fair trading plantations where the agricultural workers receive a fair wage and share of profits. Investors in ECR's shares are primarily ethical investors and mutual funds that concentrate on investing in companies that have high corporate social responsibility ratings. * Last year, the audit team uncovered an error in the ending inventory balance in the amount of $65,000 overstatement. * In discussion with the company's management, you have learned that ECR currently has about 10% of the coffee bean market in Ontario. Its coffee is considered to be a premium product because of its ethical sources but also because it purchases only the highest quality of Arabica beans and uses a special just-in-time roasting and delivery business process that puts the very best-quality product into the stores at the peak of its flavour. About 75% of its sales are to independent neighbourhood coffee shops in urban areas. ECR also sells to one major coffee shop chain, and supplies an up-market grocery store chain. Fair trade coffees can sell for 20–25% more than coffee from other sources and have enjoyed increasing popularity over the past few years. * The client trial balance as at December 31, 2013 is provided below. The client has printed this from their system.

Office Moving & Storage Limited
* The company has been in existence for 10 years and is in the business of moving furniture and equipment for company offices across Canada, and also providing storage for companies requiring that service. The company is privately owned equally by 3 shareholders, all of which are involved in operating the company.

* OMS owns four properties outside of major urban centres; this is where it has warehouse buildings for storing customers' furniture and garages for parking its own moving trucks. OMS has a force of salespeople who follow commercial real estate construction and leasing reports to identify sales prospects: large and medium companies that are planning to move offices. The prospects are assigned to salespeople who then follow up and try to sell a moving and storage contract to the company, along with other services to facilitate the office move. The salespeople prepare a cost quote for doing the move, and this must be approved by the regional sales manager prior to giving it to the prospect company.

* The regional sales managers have the authority to lower the quoted price if a competing moving company undercuts OMS's quote. Once a move has been started, in many cases the customer requires extra services beyond those contracted for (such as extra boxes, packing, disassembling furniture, removal of trash, etc.), and these are billed as extra charges. The moving employees on the job record the types of extra services provided in a Customer Moving Job Report. These extras are then priced by the assistance sales managers, and added to the amount billed to the customer.

* Customers with...
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