Therefore when this financial year ended, stock that record in inventory might not value the same as new release and we are strongly uspected that there will be potential misstatement within inventory account.
Under an assumption that current technology or inventory is decreasing in value every season, fgure that shown in balance sheet (inventory) may not be updated fast enough, hence potential misstatement existed. In this case inventory account has been directly affected. http://www. smartcompany. com. au/retail/20091001-harvey- norman-optimistic-despite-trading-loss.
html 2.Location issue As discussed earlier, Harvey Norman is a Australia based company, business cover globally, in process of annual report, auditors have to conclude number fgure into Australia dollar as reported currency. In this case, PP& E account or Revenue account (overseas part) could have possibly affected by potential misstated. As we all know currency are floating every second 24 hours, which means, the profit company made today may not equal to tomorrows value under a condition that the money still haven't convert into Australian dollar, hence holding foreign currency( in this case EURO).In order to establish business overseas, we do earn and spent foreign currencies and since Harvey Norman is an Australia based enterprise. There'll be ransactions involved currency conversion; hence number shown in annual report may not catch todays currency.
This assertion against accounts above could be arguable. Although parent company is based in Australia, but in order to run a business, we require the domestic currency that the country of business bases on. In accounting term refers to free cash flow.In this case as conclusion, due to the matter of currency compare to annual report, number figure shown in annual report could be possibly misstated.
3. Close down of new business In 2008, Harvey Norman has made an important decision in regards of its business xpenditures; the new business is totally new to the firm itself, a chain stationery However in 2009 the firm had decided to close down the total of 5 stores due to unsatisfied earning. Moreover it had made financial loss in between 7-8 million in 08-09 financial report.In regard of this case, I did an assumption on potential misstated on inventory account or revenue account, from this closing down, what we been told in annual report is company had record 7-8 million loss, but except for loss, company didn't release information arrangement on existing stock (stationeries), here are possible firm Just reuse the stationery which should have increase in stationery account, however listed company not likely to take this accounted.
The other way firm may have re-sell inventory and record in sales revenue, the major reason the assumption been made is because, regards to the business nature, stationery is definitely not the core part of the business. So most likely they would have resell them to cover expenses or loss. If that assumption stands, revenue account is possible potentially misstated. http://www. smartcompany. com.
au/retail/harvey-norman-shuts-down-ofis-chain-after- ust-one-year. tml 4. Revalue portfolio. In 26 March 2009, the chairman of Harvey Norman Gerald Harvey had made an announcement, that during the economy downturn, company is not revaluating its billions property portfolio. As other listed property company had been revaluated and receive a massive wrote down.
With this action that come from Harvey norman, i highly doubt the trustworthy on number that shown in property plant ; equipment.Quote from AASBI 16 para 38'states that a class of assets may be revalued on a rolling basis provided that the revaluation of the class of assets is completed within a short eriod of time and provided the revaluations are kept up to date' under an assumption that within the economy turndown, PP;Es have been wrote down for certain percent, however the firm itself didn't provide the true current value in the report, i would strongly suspect the annual report contain potential material misstatement on PP&E account.And infect the market had truly wrote down most of the property on the market which can support by other listed company who had their revaluate done in that period. In this case, as conclusion potential material misstatement fairly existed under observation and gave directly affect to PP&E account.
