Question Tag: Food poisoning

BDE Company Limited operates a hotel providing accommodation, leisure facilities, and restaurants. Its year-end is 31 March. You are the senior associate of ABC and Associates and are currently preparing the audit programmes for the year-end audit of BDE Company Limited. You are reviewing the notes of last week’s meeting between the audit manager and finance director, where two material issues were discussed.

Depreciation
BDE Company Limited incurred significant capital expenditure during the year for refurbishing the restaurant facilities for the hotel. The finance director has proposed that the new leisure equipment should be depreciated over 10 years using the straight-line method.

Food Poisoning
BDE’s directors received correspondence in January from a group of customers who attended a wedding at the hotel. They have alleged that they suffered severe food poisoning from food eaten at the hotel and are claiming substantial damages. BDE’s lawyers have received the claim and believe that the lawsuit against the company is unlikely to be successful.

Required:
i) Describe substantive procedures to obtain sufficient and appropriate audit evidence in relation to the above two issues. (6 marks)

ii) List and explain the purpose of three items that should be included on every working paper prepared by the audit team during the audit of depreciation and food poisoning of BDE Company Limited. (3 marks)