Lancaster Electronics Company Case Analysis

Auditor’s responsibility is to express an opinion on the financial statements based on the audit, and the auditors are required to conduct their auditing process in accordance with auditing standards. During all auditing stages, it is important to pay extra attention to obtained information and evidence in relation to the disclosures and footnotes made in the notes to the financial statements. If there are any changes in the loan agreement, dividend policy, manufacturing plant building and a line of products, all these changes must be noted in the financial statements; therefore, this paper is going to address additional disclosures for the above changes in the financial statements and the footnotes recommended to the client, Lancaster Electronics Company.
Item One- The Dividend Policy According to the auditor’s report on Lancaster Electronics, the company interrupted
Leasing a manufacturing plant building for ten years is classified as operating lease, which the lessee will not recognize lease assets or liabilities on the balance sheet. When it comes to reporting on the financial statement, it is not always provide a clear and faithful reporting of leasing transactions; therefore, it needs more disclosures in the notes to the financial statement. In addition, Lancaster has option of purchasing the asset at the end of the ten year. If it is certain that Lancaster decides to purchase the building, the company must make sure to disclose the gross amount of the leased asset and the depreciation, lease arrangement, the restrictions, charge of interest, and the payments. As an auditor, it is important to perform procedures to ensure the financial statement presentation conforms the general principle of adequate disclosure and by reviewing of subsequent events, search for related party transactions, pledged assets, leases, and description of items in the financial statement (Whittington & Pany,