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[主观题]

（b) Draft a report as at today’s date advising Cutlass Inc on its proposed activities. The

(b) Draft a report as at today’s date advising Cutlass Inc on its proposed activities. The report should cover the

following issues:

(i) The rate at which the profits of Cutlass Inc will be taxed. This section of the report should explain:

– the company’s residency position and what Ben and Amy would have to do in order for the company

to be regarded as resident in the UK under the double tax treaty;

– the meaning of the term ‘permanent establishment’ and the implications of Cutlass Inc having a

permanent establishment in Sharpenia;

– the rate at which the profits of Cutlass Inc will be taxed on the assumption that it is resident in the

UK under the double tax treaty and either does or does not have a permanent establishment in

Sharpenia. (9 marks)

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发布时间：2021-04-18

更多“（b) Draft a report as at today’s date advising Cutlass Inc on its proposed activities. The”相关的问题

第1题

（b) Draft a report suitable for inclusion in a Management Commentary for Jones and Cousin

(b) Draft a report suitable for inclusion in a Management Commentary for Jones and Cousin which deals with:

(i) the key risks and relationships of the business (9 marks)

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第2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3题

You are the partner responsible for performing an engagement quality control review on the

audit of Snipe Co. You are currently reviewing the audit working papers and draft audit report on the financial statements of Snipe Co for the year ended 31 January 2012. The draft financial statements recognise revenue of $8·5 million, profit before tax of $1 million, and total assets of $175 million.

(a) During the year Snipe Co’s factory was extended by the self-construction of a new processing area, at a total cost of $5 million. Included in the costs capitalised are borrowing costs of $100,000, incurred during the six-month period of construction. A loan of $4 million carrying an interest rate of 5% was taken out in respect of the construction on 1 March 2011, when construction started. The new processing area was ready for use on 1 September 2011, and began to be used on 1 December 2011. Its estimated useful life is 15 years.

Required:

In respect of your file review of non-current assets:

Comment on the matters that should be considered, and the evidence you would expect to find regarding the new processing area. (8 marks)

(b) Snipe Co has in place a defined benefit pension plan for its employees. An actuarial valuation on 31 January 2012 indicated that the plan is in deficit by $10·5 million. The deficit is not recognised in the statement of financial position. An extract from the draft audit report is given below:

Auditor’s opinion

In our opinion, because of the significance of the matter discussed below, the financial statements do not give a true and fair view of the financial position of Snipe Co as at 31 January 2012, and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.

Explanation of adverse opinion in relation to pension

The financial statements do not include the company’s pension plan. This deliberate omission contravenes accepted accounting practice and means that the accounts are not properly prepared.

Required:

Critically appraise the extract from the proposed audit report of Snipe Co for the year ended 31 January 2012.

Note: you are NOT required to re-draft the extract of the audit report. (7 marks)

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第4题

（c) On 1 May 2007 Sirus acquired another company, Marne plc. The directors of Marne, who w

shareholders, were offered an increased profit share in the enlarged business for a period of two years after the

date of acquisition as an incentive to accept the purchase offer. After this period, normal remuneration levels will

be resumed. Sirus estimated that this would cost them $5 million at 30 April 2008, and a further $6 million at

30 April 2009. These amounts will be paid in cash shortly after the respective year ends. (5 marks)

Required:

Draft a report to the directors of Sirus which discusses the principles and nature of the accounting treatment of

the above elements under International Financial Reporting Standards in the financial statements for the year

ended 30 April 2008.

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第5题

（d) Sirus raised a loan with a bank of $2 million on 1 May 2007. The market interest rate

(d) Sirus raised a loan with a bank of $2 million on 1 May 2007. The market interest rate of 8% per annum is to

be paid annually in arrears and the principal is to be repaid in 10 years time. The terms of the loan allow Sirus

to redeem the loan after seven years by paying the full amount of the interest to be charged over the ten year

period, plus a penalty of $200,000 and the principal of $2 million. The effective interest rate of the repayment

option is 9·1%. The directors of Sirus are currently restructuring the funding of the company and are in initial

discussions with the bank about the possibility of repaying the loan within the next financial year. Sirus is

uncertain about the accounting treatment for the current loan agreement and whether the loan can be shown as

a current liability because of the discussions with the bank. (6 marks)

Appropriateness of the format and presentation of the report and quality of discussion (2 marks)

Required:

Draft a report to the directors of Sirus which discusses the principles and nature of the accounting treatment of

the above elements under International Financial Reporting Standards in the financial statements for the year

ended 30 April 2008.

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第6题

（b) You are the audit manager of Johnston Co, a private company. The draft consolidated fi

(b) You are the audit manager of Johnston Co, a private company. The draft consolidated financial statements for

the year ended 31 March 2006 show profit before taxation of $10·5 million (2005 – $9·4 million) and total

assets of $55·2 million (2005 – $50·7 million).

Your firm was appointed auditor of Tiltman Co when Johnston Co acquired all the shares of Tiltman Co in March

2006. Tiltman’s draft financial statements for the year ended 31 March 2006 show profit before taxation of

$0·7 million (2005 – $1·7 million) and total assets of $16·1 million (2005 – $16·6 million). The auditor’s

report on the financial statements for the year ended 31 March 2005 was unmodified.

You are currently reviewing two matters that have been left for your attention on the audit working paper files for

the year ended 31 March 2006:

(i) In December 2004 Tiltman installed a new computer system that properly quantified an overvaluation of

inventory amounting to $2·7 million. This is being written off over three years.

(ii) In May 2006, Tiltman’s head office was relocated to Johnston’s premises as part of a restructuring.

Provisions for the resulting redundancies and non-cancellable lease payments amounting to $2·3 million

have been made in the financial statements of Tiltman for the year ended 31 March 2006.

Required:

Identify and comment on the implications of these two matters for your auditor’s reports on the financial

statements of Johnston Co and Tiltman Co for the year ended 31 March 2006. (10 marks)

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第7题

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

in the files of two audit clients.

Palm Industries Co (Palm)

Palm’s year end was 31 March 2015 and the draft financial statements show revenue of $28·2 million, receivables of $5·6 million and profit before tax of $4·8 million. The fieldwork stage for this audit has been completed.

A customer of Palm owed an amount of $350,000 at the year end. Testing of receivables in April highlighted that no amounts had been paid to Palm from this customer as they were disputing the quality of certain goods received from Palm. The finance director is confident the issue will be resolved and no allowance for receivables was made with regards to this balance.

Ash Trading Co (Ash)

Ash is a new client of Chestnut & Co, its year end was 31 January 2015 and the firm was only appointed auditors in February 2015, as the previous auditors were suddenly unable to undertake the audit. The fieldwork stage for this audit is currently ongoing.

The inventory count at Ash’s warehouse was undertaken on 31 January 2015 and was overseen by the company’s internal audit department. Neither Chestnut & Co nor the previous auditors attended the count. Detailed inventory records were maintained but it was not possible to undertake another full inventory count subsequent to the year end.

The draft financial statements show a profit before tax of $2·4 million, revenue of $10·1 million and inventory of $510,000.

Required:

For each of the two issues:

(i) Discuss the issue, including an assessment of whether it is material;

(ii) Recommend ONE procedure the audit team should undertake to try to resolve the issue; and

(iii) Describe the impact on the audit report if the issue remains UNRESOLVED.

Notes:

1 The total marks will be split equally between each of the two issues.

2 Audit report extracts are NOT required.

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第8题

（b) When a director retires, amounts become payable to the director as a form. of retireme

(b) When a director retires, amounts become payable to the director as a form. of retirement benefit as an annuity.

These amounts are not based on salaries paid to the director under an employment contract. Sirus has

contractual or constructive obligations to make payments to former directors as at 30 April 2008 as follows:

(i) certain former directors are paid a fixed annual amount for a fixed term beginning on the first anniversary of

the director’s retirement. If the director dies, an amount representing the present value of the future payment

is paid to the director’s estate.

(ii) in the case of other former directors, they are paid a fixed annual amount which ceases on death.

The rights to the annuities are determined by the length of service of the former directors and are set out in the

former directors’ service contracts. (6 marks)

Required:

Draft a report to the directors of Sirus which discusses the principles and nature of the accounting treatment of

the above elements under International Financial Reporting Standards in the financial statements for the year

ended 30 April 2008.

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第9题

5 You are the manager responsible for the audit of Blod Co, a listed company, for the year

ended 31 March 2008. Your

firm was appointed as auditors of Blod Co in September 2007. The audit work has been completed, and you are

reviewing the working papers in order to draft a report to those charged with governance. The statement of financial

position (balance sheet) shows total assets of $78 million (2007 – $66 million). The main business activity of Blod

Co is the manufacture of farm machinery.

During the audit of property, plant and equipment it was discovered that controls over capital expenditure transactions

had deteriorated during the year. Authorisation had not been gained for the purchase of office equipment with a cost

of $225,000. No material errors in the financial statements were revealed by audit procedures performed on property,

plant and equipment.

An internally generated brand name has been included in the statement of financial position (balance sheet) at a fair

value of $10 million. Audit working papers show that the matter was discussed with the financial controller, who

stated that the $10 million represents the present value of future cash flows estimated to be generated by the brand

name. The member of the audit team who completed the work programme on intangible assets has noted that this

treatment appears to be in breach of IAS 38 Intangible Assets, and that the management refuses to derecognise the

asset.

Problems were experienced in the audit of inventories. Due to an oversight by the internal auditors of Blod Co, the

external audit team did not receive a copy of inventory counting procedures prior to attending the count. This caused

a delay at the beginning of the inventory count, when the audit team had to quickly familiarise themselves with the

procedures. In addition, on the final audit, when the audit senior requested documentation to support the final

inventory valuation, it took two weeks for the information to be received because the accountant who had prepared

the schedules had mislaid them.

Required:

(a) (i) Identify the main purpose of including ‘findings from the audit’ (management letter points) in a report

to those charged with governance. (2 marks)

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第10题

You are a manager in the audit department of Nidge & Co, a firm of Chartered Certified

Accountants, responsible for the audit of Darren Co, a new audit client operating in the construction industry. Darren Co’s financial year ended on 31 January 2015, and the draft financial statements recognise profit before tax of $22·5 million (2014 – $20 million) and total assets of $370 million, including cash of $3 million. The company typically works on three construction contracts at a time.

The audit is nearly complete and you are reviewing the audit working papers. The audit senior has brought several matters to your attention:

(a) Darren Co is working on a major contract relating to the construction of a bridge for Flyover Co. Work started in July 2014, and it is estimated that the contract will be completed in September 2015. The contract price is $20 million, and it is estimated that a profit of $5 million will be made on completion of the contract. The full amount of this profit has been included in the statement of profit or loss for the year ended 31 January 2015. Darren Co’s management believes that this accounting treatment is appropriate given that the contract was signed during the financial year, and no problems have arisen in the work carried out so far. (8 marks)

(b) A significant contract was completed in September 2014 for Newbuild Co. This contract related to the construction of a 20-mile highway in a remote area. In November 2014, several large cracks appeared in the road surface after a period of unusually heavy rain, and the road had to be shut for ten weeks while repair work was carried out. Newbuild Co paid for these repairs, but has taken legal action against Darren Co to recover the costs incurred of $40 million. Disclosure on this matter has been made in the notes to the financial statements. Audit evidence, including a written statement from Darren Co’s lawyers, concludes that there is a possibility, but not a probability, of Darren Co having to settle the amount claimed. (6 marks)

(c) For the first time this year, the financial statements are presented as part of an integrated report. Included in the integrated report are several key performance indicators, one of which states that Darren Co’s profit before tax has increased by 20% from the previous year. (6 marks)

Required:

Discuss the implications of the matters described above on the completion of the audit and on the auditor’s report, recommending any further actions which should be taken by the auditor.

Note: The mark allocation is shown next to each of the matters above.

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