Business Report 10 November 2018
Hellios to recall four million notebook batteries
By Tom Krazit and Michael Kanellos
Hellios plans to recall 4.1 million notebook batteries, representing 90% of the
notebooks sold by the company in the first 2 months of the 2019 financial year. This
announcement was made by the chairman and founder of the company, Mr Michael
Hellios.
The recall affects certain types of notebook computers which are sold by the company,
that is the Inspiron, Latitude and Precision notebook computers which were delivered
to customers between October 2018 and November 2018. A spokesperson, for
Hellios, said that customers who have batteries involved in the recall, would be
contacted today via phone, email or advertisements placed in all the national
newspapers. Replacement batteries would be sent to affected customers at no cost
to the customers.
The spokesperson for Hellios, declined to disclose the cost to the company. The
company was still investigating incidents where batteries in its notebook computers
have reportedly exploded.
Hellios has also indicated that it was about to kick off discussions with consumer
product safety regulators about the issue.
EXTRACTS FROM WORKING PAPERS
Client: Hellios Computers Limited Year-end: 30 September
2019
C600
1/1
Prepared by: Mr Stanley Date: 30 July 2019
Reviewed by: Miss Majori Date: 3 August 2019
Subject: Understanding the entity.
Health and safety in the manufacturing process
The company manufactures the batteries used in the notebook computers. Employees
working in the assembly department have to wear safety clothing because during the
manufacture of the lithium-ion batteries, which are used for the notebook computers, the
batteries can cause a chemical reaction that is considered quite violent. Further impurities
that is tiny pieces of the metal can work their way to the edge of the anode or cathode of
the batteries and rupture the isolation that sits between these two components. This creates
a short circuit, which leads to fire. The safety officer, Mr Jobs, continuously monitors all
workers to ensure compliance with health and safety standards as required by union
guidelines. However, Mr Jobs has acknowledged that staff make mistakes on the job due
to exhaustion, because of the limited number of staff that are hired to work in the assembly
plant.
In view of the high demand for the popular ranges of notebook computer models over the
past two years, the assembly plant workers had to work overtime in order to meet demands
for the popular ranges of notebook computer models. Equipment was used in the assembly
plant to its maximum capacity.
For the whole month of June 2019, Mr Jobs was on sick leave due to contracting swine flu.
In his absence, a number of accidents occurred in the assembly plant due to noncompliance with health and safety regulations. The injured factory employees were treated
in hospital at the cost of the company.
PART B (20 marks)
Your audit team have already completed the planning and the interim audit fieldwork
during the 2019 audit of Hellios. You have focused on updating your knowledge of the
risks faced by the business and validating the internal control processes over certain
areas.
At present your audit team are conducting the year end audit procedures and you are
reviewing the working papers of Hellios for the year ended 30 September 2019.
The following working papers (attached) were presented to you by the audit manager:
WP description Working paper reference
Inventories D100
Job card used for Aramco order D101
The Hellios concept stores. G100
Evaluation of the financial position of the company. H100
Audit differences L100
REQUIRED:
1 Using working paper D100 and D101, prepare an additional working paper for
inclusion on your audit file, and formulate the audit procedures you will conduct
in respect of the special order from Aramco Industries for the 20 notebook
computers at 30 September 2019. (15)
4 With reference to working paper H100, prepare a working paper and formulate
the procedures that your audit team should perform to determine whether
Hellios is still a going concern. (5)