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Case Analysis for Accounting Theory Course.

I am having a problem with three of the eight points (6,7,8) in relation to this problem. I am required to prepare a memo to the partner in accounting firm covering in detail the accounting and audit issues arising from this engagement.

Attached is point number 6 - the question relates to inventory.

The following points I could not attach as I could only attach 3 files. These are the two other questions I require insight in.

7.) The $3,514 million term bank loan is secured by a floating charge over all corporate assets. The loan agreement requires Autotech to undergo an annual environmental assessment of the old and new blending facilites. During your meeting, Mr. Douglas enquired whether your firm could provide such an assessment.

8.) Autotech has incurred substantial losses during the past fiscal years.


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THE Case Analysis for Accounting Theory Course Document is enclosed.

Case Analysis for Accounting Theory Course.
Q6. Inventory consists of raw materials; semi processed liquids, and finished goods. Approximately 60% of the value of inventory relates to Synlube production at the new plant. The forth quarter inventory count resulted in a significant book to physical adjustment. Management thinks that the standard costs used may have caused the problem

Autotech has started new facility for producing industrial lubricant oil Synlube and
The discrepancies relate to only to it, all previous lines are well stabilized and there are no problems there. The following are the main problems with regard to its new facility:

1. It's the main challenge here is to stabilize inventory processes.
2. The 60% of the value of inventory relates to Synlube production because the sale of product is yet to pick and so there is pile up of inventory.
3. The fourth quarter is related to production of Synlube and therefore significant book to physical adjustment relate to it. It is primarily due to testing stage and beginning of commercial production at new facility of the new product. Actual consumption of materials at every stage is yet to be ascertained therefore consumption are based on standards instead of physical measurements and due to this the differences have arrived.
4. Once the production stabilizes and ...

Solution Summary

The expert examines case analysis for accounting theory courses. Audit issues arising from the engagements are determined.