Gam Co sells electronic equipment and is about to launch a new product onto the market. It

第1题

Which of the following statements describes target costing？A.It calculates the expected co

Which of the following statements describes target costing？

A.It calculates the expected cost of a product and then adds a margin to it to arrive at the target selling price

B.It allocates overhead costs to products by collecting the costs into pools and sharing them out according to each product’s usage of the cost driving activity

C.It identifies the market price of a product and then subtracts a desired profit margin to arrive at the target cost

D.It identifies different markets for a product and then sells that same product at different prices in each market

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第2题

Hummingbird Scents Co （Hummingbird) manufactures and sells luxury toiletries; they have be

Hummingbird Scents Co (Hummingbird) manufactures and sells luxury toiletries; they have been trading for over 20 years and the company’s year end is 30 September 2014. Hummingbird sells products to trade customers via its own website; this represents 60% of revenue. Remaining revenue is generated by contracts to supply toiletries to hotels. Below is a description of the sales system.

Hotel revenue

The hotel revenue is made up of four key customers. Hummingbird has one sales clerk, Brenda, who maintains all aspects of this revenue stream; Brenda receives customer orders, raises sales invoices and processes payments. In raising invoices, the sales system automatically inserts the online trade customer prices for products. However, each hotel customer has contracted prices which are lower than the online prices and hence Brenda manually edits the invoices prior to despatch.

Online revenue

New trade customers are set up in the sales ledger master file upon passing suitable credit checks, and a credit limit is set at this stage by the finance director. Customers place online orders up to their pre-set credit limit; they receive an email confirmation and the sales order interfaces into the despatch system. The order number is linked to the customer account number. Goods are despatched daily with a goods despatched note which is referenced to the sales order number but are not sequentially numbered. Hummingbird used to despatch goods via a reliable national courier company. However, to reduce costs they have changed to a cheaper local courier and some orders have been delivered to customers late.

Trade customers’ sales invoices are automatically generated by the system on the day the online order is placed. The prices are inserted in accordance with the website rates. Occasionally Hummingbird makes special offers or discounts sales; when this occurs the master file data has to be amended to ensure that the correct prices are used on invoices. This task is usually performed by a senior sales ledger clerk.

Revenue and receivables records

On a monthly basis statements are sent to the hotel customers; a number of trade customers have been requesting monthly statements and Hummingbird is considering this request. The company only reconciles the sales ledger control account at the end of September in order to verify the year-end balance.

Required:

(a) As the external auditor of Hummingbird Co, write a report to management in respect of the sales system described above which:

(i) Identifies and explains SEVEN deficiencies in the sales system; and

(ii) Provides a recommendation to address each of these deficiencies.

A covering letter IS required.

Note: Up to two marks will be awarded within this requirement for presentation and the remaining marks will be split equally between each part. (16 marks)

(b) Describe substantive procedures the auditor should perform. to confirm Hummingbird Co’s revenue. (4 marks)

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第3题

Glove Co makes high quality, hand-made gloves which it sells for an average of $180 per pa

ir. The standard cost of labour for each pair is $42 and the standard labour time for each pair is three hours. In the last quarter, Glove Co had budgeted production of 12,000 pairs, although actual production was 12,600 pairs in order to meet demand.

37,000 hours were used to complete the work and there was no idle time. The total labour cost for the quarter was $531,930.

At the beginning of the last quarter, the design of the gloves was changed slightly. The new design required workers to sew the company’s logo on to the back of every glove made and the estimated time to do this was 15 minutes for each pair. However, no-one told the accountant responsible for updating standard costs that the standard time per pair of gloves needed to be changed. Similarly, although all workers were given a 2% pay rise at the beginning of the last quarter, the accountant was not told about this either. Consequently, the standard was not updated to reflect these changes.

When overtime is required, workers are paid 25% more than their usual hourly rate.

Required:

(a) Calculate the total labour rate and total labour efficiency variances for the last quarter. (2 marks)

(b) Analyse the above total variances into component parts for planning and operational variances in as much detail as the information allows. (6 marks)

(c) Assess the performance of the production manager for the last quarter. (7 marks)

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第4题

You are the audit supervisor of Seagull & Co and are currently planning the audit of y

our existing client, Eagle Heating Co (Eagle), for the year ending 31 December 2014. Eagle manufactures and sells heating and plumbing equipment to a number of home improvement stores across the country.

Eagle has experienced increased competition and as a result, in order to maintain its current levels of sales, it has decreased the selling price of its products significantly since September 2014. The finance director has informed your audit manager that he expects increased inventory levels at the year end. He also notified your manager that one of Eagle’s key customers has been experiencing financial difficulties. Therefore, Eagle has agreed that the customer can take a six-month payment break, after which payments will continue as normal. The finance director does not believe that any allowance is required against this receivable.

In October 2014 the financial controller of Eagle was dismissed. He had been employed by the company for over 20 years, and he has threatened to sue the company for unfair dismissal. The role of financial controller has not yet been filled and so his tasks have been shared between the existing finance department team. In addition, the purchase ledger supervisor left in August and a replacement has been appointed in the last week. However, for this period no supplier statement reconciliations or purchase ledger control account reconciliations were performed.

You have undertaken a preliminary analytical review of the draft year to date statement of profit or loss, and you are surprised to see a significant fall in administration expenses.

Required:

Explain FIVE audit risks, and the auditor’s response to each risk, in planning the audit of Eagle Heating Co.

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第5题

Strom Co is a clothing retailer, with stores selling mid-price clothes and clothing access

ories throughout Europe. It sells its own-brand items, which are produced by small manufacturers located in Africa, who work solely for Strom Co. The recent European sovereign debt crisis has affected a number of countries in the European Union (EU). Consequently, Strom Co has found trading conditions to be extremely difficult, putting pressure on profits and sales revenue.

The sovereign debt crisis in Europe resulted in countries finding it increasingly difficult and expensive to issue government bonds to raise funds. Two main reasons have been put forward to explain why the crisis took place: firstly, a number of countries continued to borrow excessive funds, because their expenditure exceeded taxation revenues; and secondly, a number of countries allocated significant sums of money to support their banks following the ‘credit crunch’ and the banking crisis.

In order to prevent countries defaulting on their debt obligations and being downgraded, the countries in the EU and the International Monetary Fund (IMF) established a fund to provide financial support to member states threatened by the risk of default, credit downgrades and excessive borrowing yields. Strict economic conditions known as austerity measures were imposed on these countries in exchange for receiving financial support.

The austerity measures have affected Strom Co negatively, and the years 2011 and 2012 have been particularly bad, with sales revenue declining by 15% and profits by 25% in 2011, and remaining at 2011 levels in 2012. On investigation, Strom Co noted that clothing retailers selling clothes at low prices and at high prices were not affected as badly as Strom Co or other mid-price retailers. Indeed, the retailers selling low-priced clothes had increased their profits, and retailers selling luxury, expensive clothes had maintained their profits over the last two to three years.

In order to improve profitability, Strom Co’s board of directors expects to cut costs where possible. A significant fixed cost relates to quality control, which includes monitoring the working conditions of employees of Strom Co’s clothing manufacturers, as part of its ethical commitment.

Required:

(a) Explain the role and aims of the International Monetary Fund (IMF) and discuss possible reasons why the austerity measures imposed on European Union (EU) countries might have affected Strom Co negatively. (10 marks)

(b) Suggest, giving reasons, why the austerity measures might not have affected clothing retailers at the high and low price range, as much as the mid-price range retailers like Strom Co. (4 marks)

(c) Discuss the risks to Strom Co of reducing the costs relating to quality control and how the detrimental impact of such reductions in costs could be decreased. (6 marks)

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第6题

The following scenario relates to questions 11–15.

Mighty IT Co provides hardware, software and IT services to small business customers.

Mighty IT Co has developed an accounting software package. The company offers a supply and installation service for $1,000 and a separate two-year technical support service for $500. Alternatively, it also offers a combined goods and services contract which includes both of these elements for $1,200. Payment for the combined contract is due one month after the date of installation.

In December 20X5, Mighty IT Co revalued its corporate headquarters. Prior to the revaluation, the carrying amount of the building was $2m and it was revalued to $2·5m.

Mighty IT Co also revalued a sales office on the same date. The office had been purchased for $500,000 earlier in the year, but subsequent discovery of defects reduced its value to $400,000. No depreciation had been charged on the sales office and any impairment loss is allowable for tax purposes.

Mighty It Co’s income tax rate is 30%.

In accordance with IFRS 15 Revenue from Contracts with Customers, when should Mighty IT Co recognise revenue from the combined goods and services contract？

A.Supply and install: on installation Technical support: over two years

B.Supply and install: when payment is made Technical support: over two years

C.Supply and install: on installation Technical support: on installation

D.Supply and install: when payment is made Technical support: when payment is made

In January 20X6, the accountant at Mighty IT Co produced the company’s draft financial statements for the year ended 31 December 20X5. He then realised that he had omitted to consider deferred tax on development costs. In 20X5, development costs of $200,000 had been incurred and capitalised. Development costs are deductible in full for tax purposes in the year they are incurred. The development is still in process at 31 December 20X5.

What adjustment is required to the income tax expense in Mighty IT Co’s statement of profit or loss for the year ended 31 December 20X5 to account for deferred tax on the development costs？

A.Increase of $200,000

B.Increase of $60,000

C.Decrease of $60,000

D.Decrease of $200,000

For each combined contract sold, what is the amount of revenue which Mighty IT Co should recognise in respect of the supply and installation service in accordance with IFRS 15？A.$700

B.$800

C.$1,000

D.$1,200

In accordance with IAS 12 Income Taxes, what is the impact of the property revaluations on the income tax expense of Mighty IT Co for the year ended 31 December 20X5？

A.Income tax expense increases by $180,000

B.Income tax expense increases by $120,000

C.Income tax expense decreases by $30,000

D.No impact on income tax expense

Mighty IT Co sells a combined contract on 1 January 20X6, the first day of its financial year.

In accordance with IFRS 15, what is the total amount for deferred income which will be reported in Mighty IT Co’s statement of financial position as at 31 December 20X6？

A.$400

B.$250

C.$313

D.$200

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第7题

下列关于CAM、GAM、RAM、NAM的说法哪些是正确的（）

A.AM即Corporate Account Manager，CAM的职责不光涵盖西门子中国DI、SI、GP等集团的业务，也涵盖西门子全球的业务

B.GAM即Global Account Manager，GAM的职责不光涵盖西门子中国DI、SI、GP等集团的业务，也涵盖西门子全球的业务

C.RAM即Regional Account Manager，RAM仅对西门子中国的DI、SI、GP等集团的业务负责，不涉及西门子全球的业务

D.NAM即National Account Manager，NAM需要联合西门子中国各个SU和BU的力量，推动DI的业务发展

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第8题

关于GAM溶液超有效期，说法正确的是（）

A.超有效期24H内，复测出货参数，OK，正常使用；NG报废

B.超有效期24H后，报废

C.超有效期12H内，复测出货参数，OK，正常使用；NG报废

D.超有效期12后，报废

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第9题

Heraklion Co is a manufacturer of footballs and is a new audit client for your firm. You a

re an audit supervisor of Spinalonga & Co and are currently preparing for the forthcoming interim and final audit for the year ending 31 October 20X6. You are required to document and assess the sales system, recommend control improvements to deal with a specific fraud issue as well as undertake substantive testing of revenue.

Sales ordering, goods despatched and invoicing

Heraklion Co sells footballs to a range of large and small sports equipment retailers in several countries. Sales are made through a network of sales staff employed by Heraklion Co, but new customer leads are generated through a third party company. Sales staff are responsible for assessing new customers’ creditworthiness and proposing a credit limit which is then authorised by the sales director. The sales staff have monthly sales targets and are able to use their discretion in granting sales discounts up to a maximum of 10%. They then record any discount granted in the customer master data file.

The sales staff visit customer sites personally and orders are completed using a two-part pre-printed order form. One copy is left with the customer and the other copy is retained by the sales person. The sales order number is based on the sales person’s own identification (ID) number.

The company markets itself on being able to despatch all orders within three working days. Once the order is taken, the sales person emails the finance department and warehouse despatch team with the customer ID and the sales order details and from this a pick list is generated. Sequentially numbered goods despatched notes are completed and filed in the warehouse.

Sequentially numbered invoices are generated using the pick lists for quantities and the customer master data file for prices. Standard credit terms for customers are 30 days and on a monthly basis sales invoices which are over 90 days outstanding are notified to the relevant sales person to chase payment directly with the customer.

Payroll fraud

The finance director, Montse Mirabelle, has informed you that a significant fraud took place during the year in the payroll department. A number of fictitious employees were set up on the payroll and wages were paid into one bank account. This bank account belonged to two supervisors, who were married, and were employed by Heraklion Co. One had sole responsibility for setting up new joiners in the payroll system and the other processed and authorised bank transfer requests for wages and supplier payments. These employees no longer work for the company and Montse has asked the audit firm for recommendations on how to improve controls in this area to prevent this type of fraud occurring again. Heraklion Co operates a Human Resources department.

Required:

(a) Describe TWO methods for documenting the sales system, and for each explain ONE advantage and ONE disadvantage of using this method. (6 marks)

(b) Identify and explain SEVEN deficiencies in the sales system of Heraklion Co and provide a recommendation to address each of these deficiencies. Note: Prepare your answer using two columns headed Control deficiency and Control recommendation respectively. (14 marks)

(c) In relation to the payroll fraud, identify and explain THREE controls Heraklion Co should implement to reduce the risk of this type of fraud occurring again and, for each control, describe how it would mitigate the risk. (6 marks)

(d) Describe substantive procedures the auditor should perform. to obtain sufficient and appropriate audit evidence in relation to Heraklion Co’s revenue. (4 marks)

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第10题

Blackcutt is a local government organisation whose financial statements are prepared using

International Financial Reporting Standards.

(a) Blackcutt wishes to create a credible investment property portfolio with a view to determining if any property may be considered surplus to the functional objectives and requirements of the local government organisation. The following portfolio of property is owned by Blackcutt.

Blackcutt owns several plots of land. Some of the land is owned by Blackcutt for capital appreciation and this may be sold at any time in the future. Other plots of land have no current purpose as Blackcutt has not determined whether it will use the land to provide services such as those provided by national parks or for short-term sale in the ordinary course of operations.

The local government organisation supplements its income by buying and selling property. The housing department regularly sells part of its housing inventory in the ordinary course of its operations as a result of changing demographics. Part of the inventory, which is not held for sale, is to provide housing to low-income employees at below market rental. The rent paid by employees covers the cost of maintenance of the property. (7 marks)

(b) Blackcutt has outsourced its waste collection to a private sector provider called Waste and Co and pays an annual amount to Waste and Co for its services. Waste and Co purchases the vehicles and uses them exclusively for Blackcutt’s waste collection. The vehicles are painted with the Blackcutt local government organisation name and colours. Blackcutt can use the vehicles and the vehicles are used for waste collection for nearly all of the asset’s life. In the event of Waste and Co’s business ceasing, Blackcutt can obtain legal title to the vehicles and carry on the waste collection service. (6 marks)

(c) Blackcutt owns a warehouse. Chemco has leased the warehouse from Blackcutt and is using it as a storage facility for chemicals. The national government has announced its intention to enact environmental legislation requiring property owners to accept liability for environmental pollution. As a result, Blackcutt has introduced a hazardous chemical policy and has begun to apply the policy to its properties. Blackcutt has had a report that the chemicals have contaminated the land surrounding the warehouse. Blackcutt has no recourse against Chemco or its insurance company for the clean-up costs of the pollution. At 30 November 2012, it is virtually certain that draft legislation requiring a clean up of land already contaminated will be enacted shortly after the year end. (4 marks)

(d) On 1 December 2006, Blackcutt opened a school at a cost of $5 million. The estimated useful life of the school was 25 years. On 30 November 2012, the school was closed because numbers using the school declined unexpectedly due to a population shift caused by the closure of a major employer in the area. The school is to be converted for use as a library, and there is no expectation that numbers using the school will increase in the future and thus the building will not be reopened for use as a school. The current replacement cost for a library of equivalent size to the school is $2·1 million. Because of the nature of the non-current asset, value-in-use and net selling price are unrealistic estimates of the value of the school. The change in use would have no effect on the estimated life of the building. (6 marks)

Required:

Discuss how the above events should be accounted for in the financial statements of Blackcutt.

Note: The mark allocation is shown against each of the four events above.

Professional marks will be awarded in question 3 for the clarity and quality of the presentation and discussion. (2 marks)

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第11题

Introduction and client backgroundYou are an audit senior in Staple and Co and you are com

Introduction and client background

You are an audit senior in Staple and Co and you are commencing the planning of the audit of Smoothbrush Paints Co for the year ending 31 August 2010.

Smoothbrush Paints Co is a paint manufacturer and has been trading for over 50 years, it operates from one central site, which includes the production facility, warehouse and administration ffices.

Smoothbrush sells all of its goods to large home improvement stores, with 60% being to one large chain store Homewares. The company has a one year contract to be the sole supplier of paint to Homewares. It secured the contract through signifi cantly reducing prices and offering a four-month credit period, the company’s normal credit period is one month.

Goods in/purchases

In recent years, Smoothbrush has reduced the level of goods directly manufactured and instead started to import paint from South Asia. Approximately 60% is imported and 40% manufactured. Within the production facility is a large amount of old plant and equipment that is now redundant and has minimal scrap value. Purchase orders for overseas paint are made six months in advance and goods can be in transit for up to two months. Smoothbrush accounts for the inventory when it receives the goods.

To avoid the disruption of a year end inventory count, Smoothbrush has this year introduced a continuous/perpetual inventory counting system. The warehouse has been divided into 12 areas and these are each to be counted once over the year. The counting team includes a member of the internal audit department and a warehouse staff member. The following procedures have been adopted;

1. The team prints the inventory quantities and descriptions from the system and these records are then compared to the inventory physically present.

2. Any discrepancies in relation to quantities are noted on the inventory sheets, including any items not listed on the sheets but present in the warehouse area.

3. Any damaged or old items are noted and they are removed from the inventory sheets.

4. The sheets are then passed to the fi nance department for adjustments to be made to the records when the count has fi nished.

5. During the counts there will continue to be inventory movements with goods arriving and leaving the warehouse.

At the year end it is proposed that the inventory will be based on the underlying records. Traditionally Smoothbrush has maintained an inventory provision based on 1% of the inventory value, but management feels that as inventory is being reviewed more regularly it no longer needs this provision.

Finance Director

In May 2010 Smoothbrush had a dispute with its fi nance director (FD) and he immediately left the company. The company has temporarily asked the fi nancial controller to take over the role while they recruit a permanent replacement. The old FD has notifi ed Smoothbrush that he intends to sue for unfair dismissal. The company is not proposing to make any provision or disclosures for this, as they are confi dent the claim has no merit.

Required:

(a) Identify and explain the audit risks identifi ed at the planning stage of the audit of Smoothbrush Paints Co. (10 marks)

(b) Discuss the importance of assessing risks at the planning stage of an audit. (4 marks)

(c) List and explain suitable controls that should operate over the continuous/perpetual inventory counting system, to ensure the completeness and accuracy of the existing inventory records at Smoothbrush Paints Co. (10 marks)

(d) Describe THREE substantive procedures the auditor of Smoothbrush Paints Co should perform. at the year end in confi rming each of the following:

(i) The valuation of inventory; (3 marks)

(ii) The completeness of provisions or contingent liabilities. (3 marks)

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