You are the audit manager of Chestnut Co and...

第1题

（c) Describe the audit procedures you should perform. to determine the validity of the amo

(c) Describe the audit procedures you should perform. to determine the validity of the amortisation rate of five

years being applied to development costs in relation to Plummet. (5 marks)

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第2题

（b) Illustrate how you might use analytical procedures to provide audit evidence and reduc

(b) Illustrate how you might use analytical procedures to provide audit evidence and reduce the level of detailed

substantive procedures. (7 marks)

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第3题

（c) Explain the extent to which you should plan to place reliance on analytical procedures

(c) Explain the extent to which you should plan to place reliance on analytical procedures as audit evidence.

(6 marks)

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第4题

（a) State the FIVE threats contained within ACCA’s Code of Ethics and Conduct and for each

(a) State the FIVE threats contained within ACCA’s Code of Ethics and Conduct and for each threat list ONE example of a circumstance that may create the threat. (5 marks)

(b) You are the audit manager of Jones & Co and you are planning the audit of LV Fones Co, which has been an audit client for four years and specialises in manufacturing luxury mobile phones.

During the planning stage of the audit you have obtained the following information. The employees of LV Fones Co are entitled to purchase mobile phones at a discount of 10%. The audit team has in previous years been offered the same level of staff discount.

During the year the fi nancial controller of LV Fones was ill and hence unable to work. The company had no spare staff able to fulfi l the role and hence a qualifi ed audit senior of Jones & Co was seconded to the client for three months. The audit partner has recommended that the audit senior work on the audit as he has good knowledge of the client. The fee income derived from LV Fones was boosted by this engagement and along with the audit and tax fee, now accounts for 16% of the fi rm’s total fees.

From a review of the correspondence fi les you note that the partner and the fi nance director have known each other socially for many years and in fact went on holiday together last summer with their families. As a result of this friendship the partner has not yet spoken to the client about the fee for last year’s audit, 20% of which is still outstanding.

Required:

(i) Explain the ethical threats which may affect the independence of Jones & Co’s audit of LV Fones Co; and (5 marks)

(ii) For each threat explain how it might be avoided. (5 marks)

(c) Describe the steps an audit fi rm should perform. prior to accepting a new audit engagement. (5 marks)

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第5题

5 You are an audit manager in Bartolome, a firm of Chartered Certified Accountants. You ha

ve specific responsibility

for undertaking annual reviews of existing clients and advising whether an engagement can be properly continued.

The following matters have arisen in connection with recent assignments:

(a) Leon Dormido is the senior in charge of the audit of the financial statements of Moreno, a limited liability

company, for the year ending 30 June 2005. Moreno’s Chief Executive Officer, James Bay, has just sent you an

e-mail to advise you that Leon has been short-listed for the position of Finance Director. You were not previously

aware that Leon had applied for the position. (5 marks)

Required:

Comment on the ethical and other professional issues raised by each of the above matters and their implications,

if any, for the continuation of each assignment.

NOTE: The mark allocation is shown against each of the three issues.

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第6题

（b) You are the audit manager of Jinack Co, a private limited liability company. You are c

(b) You are the audit manager of Jinack Co, a private limited liability company. You are currently reviewing two

matters that have been left for your attention on the audit working paper file for the year ended 30 September

2005:

(i) Jinack holds an extensive range of inventory and keeps perpetual inventory records. There was no full

physical inventory count at 30 September 2005 as a system of continuous stock checking is operated by

warehouse personnel under the supervision of an internal audit department.

A major systems failure in October 2005 caused the perpetual inventory records to be corrupted before the

year-end inventory position was determined. As data recovery procedures were found to be inadequate,

Jinack is reconstructing the year-end quantities through a physical count and ‘rollback’. The reconstruction

exercise is expected to be completed in January 2006. (6 marks)

Required:

Identify and comment on the implications of the above matters for the auditor’s report on the financial

statements of Jinack Co for the year ended 30 September 2005 and, where appropriate, the year ending

30 September 2006.

NOTE: The mark allocation is shown against each of the matters.

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第7题

（a) You are the manager responsible for the audit of Dylan Co, a listed company, and you a

(a) You are the manager responsible for the audit of Dylan Co, a listed company, and you are reviewing the working papers of the audit file for the year ended 30 September 2012. The audit senior has left a note for your attention:

‘Dylan Co outsources its entire payroll, invoicing and credit control functions to Hendrix Co. In August 2012, Hendrix Co suffered a computer virus attack on its operating system, resulting in the destruction of its accounting records, including those relating to Dylan Co. We have therefore been unable to perform. the planned audit procedures on payroll, revenue and receivables, all of which are material to the financial statements. Hendrix Co has manually reconstructed the relevant figures as far as possible, and has supplied a written statement to confirm that they are as accurate as possible, given the loss of accounting records.’

Required:

(i) Comment on the actions that should be taken by the auditor, and the implications for the auditor’s report; and (7 marks)

(ii) Discuss the quality control procedures that should be carried out by the audit firm prior to the audit report being issued. (3 marks)

(b) You are also responsible for the audit of Squire Co, a listed company, and you are completing the review of its interim financial statements for the six months ended 31 October 2012. Squire Co is a car manufacturer, and historically has offered a three-year warranty on cars sold. The financial statements for the year ended 30 April 2012 included a warranty provision of $1·5 million and recognised total assets of $27·5 million. You are aware that on 1 July 2012, due to cost cutting measures, Squire Co stopped offering warranties on cars sold. The interim financial statements for the six months ended 31 October 2012 do not recognise any warranty provision. Total assets are $30 million at 31 October 2012.

Required:

Assess the matters that should be considered in forming a conclusion on Squire Co’s interim financial statements, and the implications for the review report. (6 marks)

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第8题

Kyanite Pizzas Co （Kyanite) operates a large chain of fast food restaurants. You are an au

Kyanite Pizzas Co (Kyanite) operates a large chain of fast food restaurants. You are an audit supervisor of Jasper & Co and are currently preparing the audit programmes for the audit of Kyanite’s financial statements for the year ended 31 March 2016. You are reviewing the notes of last week’s meeting between the audit manager and finance director where two material issues were discussed.

(i) Property, plant and equipment

In the past Kyanite has received negative press reports over the condition of its fast food restaurants, with comments suggesting they are old fashioned and tired looking. Therefore during the year the company undertook a full review of all its assets and carried out extensive refurbishments to the majority of its restaurants. This review resulted in a significant amount of ageing fixtures and fittings being disposed of and a significant amount of capital expenditure was invested in all remaining restaurants. (6 marks)

(ii) Equity The refurbishment was financed via a share issue in April 2015 at a premium of $1·6 million. (4 marks)

Required:

Describe substantive procedures you should perform. to obtain sufficient and appropriate audit evidence in relation to the above two matters.

Note: The mark allocation is shown against each of the two matters above.

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第9题

Jackdaw Motor Cars Co （Jackdaw) manufactures a range of motor cars and its year end is 31

Jackdaw Motor Cars Co (Jackdaw) manufactures a range of motor cars and its year end is 31 January 2015. You are the audit supervisor of Puffin & Co and are currently preparing the audit programmes for the year-end audit of Jackdaw. You have had a meeting with your audit manager and he has notified you of a number of issues identified during the audit risk assessment process.

Land and buildings

Jackdaw have a policy of revaluing land and buildings, this is undertaken on a rolling basis over a five-year period. During the year Jackdaw requested an external valuer to revalue a number of properties, including a warehouse purchased in May 2014. Depreciation is charged on a pro rata basis.

Work in progress

Jackdaw undertakes continuous production of cars, 24 hours a day, seven days a week. An inventory count is to be undertaken at the year end and Puffin & Co will attend. You are responsible for the audit of work in progress (WIP) and will be part of the team attending the count as well as the final audit. WIP constitutes the partly assembled cars at the year end and this balance is likely to be material. Jackdaw values WIP according to percentage of completion, and standard costs are then applied to these percentages.

Required:

(a) Explain the factors Puffin & Co should consider when placing reliance on the work of the independent valuer. (5 marks)

(b) Describe the substantive procedures the auditor should perform. to obtain sufficient and appropriate audit evidence in relation to:

(i) The revaluation of land and buildings and the recently purchased warehouse; and (6 marks)

(ii) The valuation of work in progress. (4 marks)

(c) During the audit, your team has identified an error in the valuation of work in progress, as a number of the assumptions contain out of date information. The directors of Jackdaw have indicated that they do not wish to amend the financial statements.

Required:

Explain the steps Puffin & Co should now take and the impact on the audit report in relation to the directors’ refusal to amend the financial statements. (5 marks)

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第10题

You are an audit manager at Rockwell & Co, a firm of Chartered Certified Accountants.

You are responsible for the audit of the Hopper Group, a listed audit client which supplies ingredients to the food and beverage industry worldwide.

The audit work for the year ended 30 June 2015 is nearly complete, and you are reviewing the draft audit report which has been prepared by the audit senior. During the year the Hopper Group purchased a new subsidiary company, Seurat Sweeteners Co, which has expertise in the research and design of sugar alternatives. The draft financial statements of the Hopper Group for the year ended 30 June 2015 recognise profit before tax of $495 million (2014 – $462 million) and total assets of $4,617 million (2014: $4,751 million). An extract from the draft audit report is shown below:

Basis of modified opinion (extract)

In their calculation of goodwill on the acquisition of the new subsidiary, the directors have failed to recognise consideration which is contingent upon meeting certain development targets. The directors believe that it is unlikely that these targets will be met by the subsidiary company and, therefore, have not recorded the contingent consideration in the cost of the acquisition. They have disclosed this contingent liability fully in the notes to the financial statements. We do not feel that the directors’ treatment of the contingent consideration is correct and, therefore, do not believe that the criteria of the relevant standard have been met. If this is the case, it would be appropriate to adjust the goodwill balance in the statement of financial position.

We believe that any required adjustment may materially affect the goodwill balance in the statement of financial position. Therefore, in our opinion, the financial statements do not give a true and fair view of the financial position of the Hopper Group and of the Hopper Group’s financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.

Emphasis of Matter Paragraph

We draw attention to the note to the financial statements which describes the uncertainty relating to the contingent consideration described above. The note provides further information necessary to understand the potential implications of the contingency.

Required:

(a) Critically appraise the draft audit report of the Hopper Group for the year ended 30 June 2015, prepared by the audit senior.

Note: You are NOT required to re-draft the extracts from the audit report. (10 marks)

(b) The audit of the new subsidiary, Seurat Sweeteners Co, was performed by a different firm of auditors, Fish Associates. During your review of the communication from Fish Associates, you note that they were unable to obtain sufficient appropriate evidence with regard to the breakdown of research expenses. The total of research costs expensed by Seurat Sweeteners Co during the year was $1·2 million. Fish Associates has issued a qualified audit opinion on the financial statements of Seurat Sweeteners Co due to this inability to obtain sufficient appropriate evidence.

Required:

Comment on the actions which Rockwell & Co should take as the auditor of the Hopper Group, and the implications for the auditor’s report on the Hopper Group financial statements. (6 marks)

(c) Discuss the quality control procedures which should be carried out by Rockwell & Co prior to the audit report on the Hopper Group being issued. (4 marks)

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第11题

4 You are an audit manager in Nate & Co, a firm of Chartered Certified Accountants. Yo

u are reviewing three situations,

which were recently discussed at the monthly audit managers’ meeting:

(1) Nate & Co has recently been approached by a potential new audit client, Fisher Co. Your firm is keen to take the

appointment and is currently carrying out client acceptance procedures. Fisher Co was recently incorporated by

Marcellus Fisher, with its main trade being the retailing of wooden storage boxes.

(2) Nate & Co provides the audit service to CF Co, a national financial services organisation. Due to a number of

errors in the recording of cash deposits from new customers that have been discovered by CF Co’s internal audit

team, the directors of CF Co have requested that your firm carry out a review of the financial information

technology systems. It has come to your attention that while working on the audit planning of CF Co, Jin Sayed,

one of the juniors on the audit team, who is a recent information technology graduate, spent three hours

providing advice to the internal audit team about how to improve the system. As far as you know, this advice has

not been used by the internal audit team.

(3) LA Shots Co is a manufacturer of bottled drinks, and has been an audit client of Nate & Co for five years. Two

audit juniors attended the annual inventory count last Monday. They reported that Brenda Mangle, the new

production manager of LA Shots Co, wanted the inventory count and audit procedures performed as quickly as

possible. As an incentive she offered the two juniors ten free bottles of ‘Super Juice’ from the end of the

production line. Brenda also invited them to join the LA Shots Co office party, which commenced at the end of

the inventory count. The inventory count and audit procedures were completed within two hours (the previous

year’s procedures lasted a full day), and the juniors then spent four hours at the office party.

Required:

(a) Define ‘money laundering’ and state the procedures specific to money laundering that should be considered

before, and on the acceptance of, the audit appointment of Fisher Co. (5 marks)

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You are the audit manager of Chestnut & Co and are reviewing the key issues identified