Case Study for Auditing Essay Example | Topics and Well Written Essays - 2000 words

Case Study for Auditing - Essay Example e aspects of this year’s audit of the financial statements, which might be regarded as high risk for Stanley Limited, include the distribution costs and the retained profit or loss from the viewpoint of income statements. From the perspective of financial presentation statement or balance sheet, the high risk aspect includes the trade payables as a part of current liabilities. From the viewpoint of the income statements, the significant aspect of distribution costs might be regarded as one of the high risk factors of this year’s audit of the financial statements of Stanley Limited. Fundamentally, the distribution costs which is also known as distribution expenses of any organisation are regarded as the expenses which are associated with the transfer of a product or commodity from the place of manufacturing to the ultimate position of the customers. Moreover, distribution costs or expenses also imply those expenses which are directly involved in order to transfer the commodities or the products from the warehouse to a person2. It has been identified that the distribution costs or expenses of Stanley Limited was increasing year after year and were becoming very much expensive as compared with other expenses i.e. administrative expenses and others. The main reason for considering the distribution expenses as a high risk factor is because the distribution costs or expenses directly affects upon the operating profit or loss of Stanley Limited. The main reasons for the increased distribution expenses of Stanley Limited can be due to its various expenses such as carriage on sales, selling expenses, salaries, travelling expenses and commission of the salesman among others. All these significant factors might constitute the distribution expenses as high risk factor for Stanley Limited3 In terms of the statements of the financial position or the balance sheet, the aspect of trade payables might be an important risk factor for Stanley Limited. Fundamentally, trade