The Case of Lancaster ElectronicsTypes of Disclosure Essay

The Case of Lancaster ElectronicsTypes of Disclosure - Essay Example As an auditor he is supposed to give a report to give direction to the management of Lancaster Electronics. The payment of the dividend, year 2009 was as per the policy, but 2010 payment was halted and resumed in the first quarter of 2011. The information should have been reflected in the equity’s statement. Grinaker & Barr (1965) argued that changes in the equity payment should always be explained briefly in the footnote of equity statement. In 2010, the dividend was retained to finance the equipment for the new plant. The amount was neither reflected in the income statement as expenses nor in cash flow statement as investing activities. An auditor has to be certain that cash generated and spent can be accounted. Lancaster electronics received a loan that was to be repaid within a timeframe of ten years. The loan is a long term liability since it has to be repaid for more than one year. This should have been reflected in the balance sheet as long term liability. A ten year loan repayment period is a huge chunk amount of money. Therefore, the report of an auditor will not represent the actual state of the company. The agreement between the lender and Lancaster, of dividend payment, should not exceed the net income is contrary to how the firm used to treat preferred stocks. A brief explanation should be attached at the footnote of the equity statement. The staff auditor’s reported stated there was no restriction on the retained earning as at 31 Dec 2011. The information should be in equity statement so that other auditor can make a report that is accurate and reliable. Failure to include that information an auditor will a make wrong conclusion regarding dividend payment. Lancaster Electronics has a new manufacturing plant that costs $ 600,000. However, the lease is neither reflecting on the balance sheet nor income statement. An increase in asset volume and value makes the company stable. If a company does not present its entire asset on the