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Nogo Co has a bank overdraft of $450,000, secured by a floating charge over its inventory. It also has a deposit with the same bank of $200,000. The bank confirmation letter states that the bank has the right to off-set these balances, and has set an overall net borrowing limit on the company of $300,000. The finance director has disclosed these amounts as "Secured overdraft - $250,000" under "Current liabilities", with no further description in the notes other than the nature of the security. What steps, if any, should the auditor take in respect of this matter? A. Accept the treatment but include an emphasis of matter paragraph in the audit report explaining that these amounts have been off-set, and disclosing the overdraft limit. B. None, as the treatment is correct. C. Insist upon classification of $200,000 under current assets and $450,000 under current liabilities. D. Insist that the company discloses in the notes the full amount of the overdraft and that it is in breach of its borrowing limit. |