You are the manager in charge of audit of a Publication Ltd, a publishing company based in Ghana, with a year end of 31 August.
It is your first year in charge of audit, although the company has existed anf your firm has been its auditors for three years. From the discussion with the engagement partner and the new managing director Mr Osei Marfo you have ascertained the following information. The copany is wholly owned subsidiary of Kencity Group, a close private holding company.
The company main business is the writing, production, printing and marketing of technical publications. The company sells these publications both to fellow group companies in the training field and also to external bodies. The company has grown rapidly with a turnover now of approximately Gh¢5 million. However the result have been poor, with profits around the Gh¢100,000 mark.
Mr Osei Marfo, the new managing director was appointed on 1 January 2008. His Objective is to produced better result and as part of his motivation he has a remuneration package that is partly profit related.
The company has recently invested heavily in Desk Top Publishing equipment and is in the process of changeover from more traditional typesetting methods. There are some “teething problems” but Mr Osei Marfo is convinced these can be sorted out shortly. Old Equipment will be scrapped.
Accounting Transactions are recorded on a microcomputer using well-known off the shelf package. No mangement accounts are prepared other than the monthly nominal ledger printer from the sagg system.
The final financial statements are prepared by the group Accountant (based in U.S.A) who travel to Ghana for two days during October for this purpose.
You are required to prepare a file memorandum setting out the factors you would consider in assessing the audit for this client and summarising the implications on the audit approach.
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