Identifying Misstatements in FROD's Financial Statements:

Seminar 9 Question 1 Part A You are the audit manager in charge of the audit of FROD Pte Ltd ("FROD" or "the Company") for the financial year ended 31 December 20x2. FROD, a board game manufacturing company, sells its board games to its customers mainly via its website and purchases its materials from its main supplier in China. In 20x2, a TV series "Squeak Games" became extremely popular globally. By chance, the CEO of FROD, Soh Kam ("SKAM") realised that the trademark for Squeak Games has not yet been registered by the Squeak Games creators. He then filed for registration of the "Squeak Games" trademark in Singapore on behalf of FROD. As at 31 December 20x2, this trademark registration has yet to be approved by the authorities. Upon filing the trademark registration and wanting to ride on the increased popularity of the show, FROD began manufacturing board games incorporating the Squeak Games characters. The manufacturing of the Squeak Games board games was completed as at 31 December 20x2. Pre-orders of the Squeak Games board games commenced on 1 December 20x2, with deliveries expected to be made in 20x3 as soon as the trademark application is approved by the authorities. Amounts collected from the pre-orders are fully refundable. You understand that if the registration of the trademark is not approved, the Company is not allowed to sell the board games. Below is an extract of the financial statements of FROD for the financial year ended 31 December 20x2, with management's comments.