Tinep Co is planning to raise funds for an expansion of existing business activities and i

第1题

（b) Explain what effect the acquisition of Di Rollo Co will have on the planning of your a

(b) Explain what effect the acquisition of Di Rollo Co will have on the planning of your audit of the consolidated

financial statements of Murray Co for the year ending 31 March 2008. (10 marks)

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第2题

（b) Explain the matters that should be considered when planning the nature and scope of th

(b) Explain the matters that should be considered when planning the nature and scope of the examination of

Cusiter Co’s forecast balance sheet and income statement as prepared for the bank. (7 marks)

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第3题

（a) ISA 300 Planning an Audit of Financial Statements provides guidance to auditors. Plann

(a) ISA 300 Planning an Audit of Financial Statements provides guidance to auditors. Planning an audit involves establishing the overall audit strategy for the engagement and developing an audit plan. Adequate planning benefits the audit of financial statements in several ways.

Required:

Explain the importance of audit planning. (5 marks)

(b) You are the audit senior in charge of the audit of Swandive Co (Swandive), and have been informed by your audit manager that during the year a fraud occurred at the client. A payroll clerk set up fictitious employees and the wages were paid into the clerk’s own bank account. This clerk has subsequently left the company, but the audit manager is concerned that additional frauds have taken place in the wages department.

Required:

Describe procedures which should be undertaken during the audit of wages as a result of the manager’s assessment of the increased risk of fraud. (5 marks)

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第4题

Bluebird Enterprises Co （Bluebird) is a retail company planning to list on a stock exchang

Bluebird Enterprises Co (Bluebird) is a retail company planning to list on a stock exchange within the next six months, and management has been advised by the company’s auditors about the need for compliance with corporate governance provisions. In particular, the finance director is looking to recruit non-executive directors as he understands that Bluebird will need to establish an audit committee.

The finance director has two potential non-executive directors whom he is considering approaching to join the board of Bluebird. Antony Goldfinch is currently an executive sales director of a listed multi-national banking company; he sits on an audit committee of another company as a non-executive director and is agreeable to being paid a fixed fee which is not related to profits. Jacob Mallard is currently a finance director of a small retail company, which does not compete with Bluebird; he has expressed an interest in a fixed seven year contract and he is the brother of Bluebird’s chief executive.

Required

(a) Explain the benefits to Bluebird Enterprises Co of establishing an audit committee. (4 marks)

(b) Discuss the advantages and disadvantages of appointing:

(i) Anthony Goldfinch; and

(ii) Jacob Mallard

as non-executive directors of Bluebird Enterprises Co.

Note: The total marks will be split equally between each part. (6 marks)

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第5题

1 Your client, Island Co, is a manufacturer of machinery used in the coal extraction indus

try. You are currently planning

the audit of the financial statements for the year ended 30 November 2007. The draft financial statements show

revenue of $125 million (2006 – $103 million), profit before tax of $5·6 million (2006 – $5·1 million) and total

assets of $95 million (2006 – $90 million). Your firm was appointed as auditor to Island Co for the first time in June

2007.

Island Co designs, constructs and installs machinery for five key customers. Payment is due in three instalments: 50%

is due when the order is confirmed (stage one), 25% on delivery of the machinery (stage two), and 25% on successful

installation in the customer’s coal mine (stage three). Generally it takes six months from the order being finalised until

the final installation.

At 30 November, there is an amount outstanding of $2·85 million from Jacks Mine Co. The amount is a disputed

stage three payment. Jacks Mine Co is refusing to pay until the machinery, which was installed in August 2007, is

running at 100% efficiency.

One customer, Sawyer Co, communicated in November 2007, via its lawyers with Island Co, claiming damages for

injuries suffered by a drilling machine operator whose arm was severely injured when a machine malfunctioned. Kate

Shannon, the chief executive officer of Island Co, has told you that the claim is being ignored as it is generally known

that Sawyer Co has a poor health and safety record, and thus the accident was their fault. Two orders which were

placed by Sawyer Co in October 2007 have been cancelled.

Work in progress is valued at $8·5 million at 30 November 2007. A physical inventory count was held on

17 November 2007. The chief engineer estimated the stage of completion of each machine at that date. One of the

major components included in the coal extracting machinery is now being sourced from overseas. The new supplier,

Locke Co, is located in Spain and invoices Island Co in euros. There is a trade payable of $1·5 million owing to Locke

Co recorded within current liabilities.

All machines are supplied carrying a one year warranty. A warranty provision is recognised on the balance sheet at

$2·5 million (2006 – $2·4 million). Kate Shannon estimates the cost of repairing defective machinery reported by

customers, and this estimate forms the basis of the provision.

Kate Shannon owns 60% of the shares in Island Co. She also owns 55% of Pacific Co, which leases a head office to

Island Co. Kate is considering selling some of her shares in Island Co in late January 2008, and would like the audit

to be finished by that time.

Required:

(a) Using the information provided, identify and explain the principal audit risks, and any other matters to be

considered when planning the final audit for Island Co for the year ended 30 November 2007.

Note: your answer should be presented in the format of briefing notes to be used at a planning meeting.

Requirement (a) includes 2 professional marks. (13 marks)

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第6题

Sunflower Stores Co （Sunflower) operates 25 food supermarkets. The company’s year end is 3

Sunflower Stores Co (Sunflower) operates 25 food supermarkets. The company’s year end is 31 December 2012. The audit manager and partner recently attended a planning meeting with the finance director and have provided you with the planning notes below.

You are the audit senior, and this is your first year on this audit. In order to familiarise yourself with Sunflower, the audit manager has asked you to undertake some research in order to gain an understanding of Sunflower, so that you are able to assist in the planning process. He has then asked that you identify relevant audit risks from the notes below and also consider how the team should respond to these risks.

Sunflower has spent $1·6 million in refurbishing all of its supermarkets; as part of this refurbishment programme their central warehouse has been extended and a smaller warehouse, which was only occasionally used, has been disposed of at a profit. In order to finance this refurbishment, a sum of $1·5 million was borrowed from the bank. This is due to be repaid over five years.

The company will be performing a year-end inventory count at the central warehouse as well as at all 25 supermarkets on 31 December. Inventory is valued at selling price less an average profit margin as the finance director believes that this is a close approximation to cost.

Prior to 2012, each of the supermarkets maintained their own financial records and submitted returns monthly to head office. During 2012 all accounting records have been centralised within head office. Therefore at the beginning of the year, each supermarket’s opening balances were transferred into head office’s accounting records. The increased workload at head office has led to some changes in the finance department and in November 2012 the financial controller left. His replacement will start in late December.

Required:

(a) List FIVE sources of information that would be of use in gaining an understanding of Sunflower Stores Co, and for each source describe what you would expect to obtain. (5 marks)

(b) Using the information provided, describe FIVE audit risks and explain the auditor’s response to each risk in planning the audit of Sunflower Stores Co. (10 marks)

(c) The finance director of Sunflower Stores Co is considering establishing an internal audit department. Required: Describe the factors the finance director should consider before establishing an internal audit department. (5 marks)

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第7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8题

ISA 210 Agreeing the Terms of Audit Engagements requires auditors to agree the terms of an

engagement with those charged with governance and formalise these in an engagement letter.

Required:

(a) Identify and explain TWO factors which would indicate that an engagement letter for an existing audit client should be revised. (2 marks)

(b) List SIX matters which should be included within an audit engagement letter. (3 marks)

(c) Your audit firm has just won a new audit client, Milky Way Technologies Co (Milky Way), and you have been asked by the audit engagement partner to gain an understanding about the new client as part of the planning process.

Required:

Identify FIVE sources of information relevant to gaining an understanding of Milky Way Technologies Co and describe how this information will be used by the auditor. (5 marks)

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第9题

You are a manager in Ryder & Co, a firm of Chartered Certified Accountants, and you ha

ve taken on the responsibility for providing support and guidance to new members of the firm. Ryder & Co has recently recruited a new audit junior, Sam Tyler, who has come across several issues in his first few months at the firm which he would like your guidance on. Sam’s comments and questions are shown below:

(a) I know that auditors are required to assess risks of material misstatement by developing an understanding of the business risks of an audit client, but I am not clear on the relationship between business risk and risk of material misstatement. Can you explain the two types of risk, and how identifying business risk relates to risk of material misstatement？ (4 marks)

(b) I worked on the interim audit of Crow Co, a manufacturing company which outsources its payroll function. I know that for Crow Co payroll is material. How does the outsourcing of payroll affect our audit planning？ (4 marks)

(c) Crow Co is tendering for an important contract to supply Hatfield Co. I know that Hatfield Co is also an audit client of our firm, and I have heard that Crow Co’s management has requested our firm to provide advice on the tender it is preparing. What matters should our firm consider in deciding whether to provide advice to Crow Co on the tender？ (5 marks)

(d) I also worked on the audit of Campbell Co, where I heard the managing director, Ting Campbell, discussing a potential new business opportunity with the audit engagement partner. Campbell Co is an events organiser, and is planning to run a programme of nationwide events for accountants, at which speakers will discuss technical updates to financial reporting, tax and audit regulations. Ting proposed that our firm could invest some cash in the business opportunity, supply the speakers, market the events to our audit clients, and that any profit made would be shared between Ryder & Co and Campbell Co. What would be the implications of our firm considering this business opportunity？ (7 marks)

Required:

For each of the issues raised, respond to the audit junior, explaining the ethical and professional matters arising from the audit junior’s comments.

Note: The split of the mark allocation is shown against each of the issues above.

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第10题

You are an audit supervisor of Pluto & Co and are currently planning the audit of your

client, Venus Magnets Co (Venus) which manufactures decorative magnets. Its year end is 31 December 2015 and the forecast profit before tax is $9·6 million.

During the year, the directors reviewed the useful lives and depreciation rates of all classes of plant and machinery. This resulted in an overall increase in the asset lives and a reduction in the depreciation charge for the year.

Inventory is held in five warehouses and on 28 and 29 December a full inventory count will be held with adjustments for movements to the year end. This is due to a lack of available staff on 31 December. In October, there was a fire in one of the warehouses; inventory of $0·9 million was damaged and this has been written down to its scrap value of $0·2 million. An insurance claim has been submitted for the difference of $0·7 million. Venus is still waiting to hear from the insurance company with regards to this claim, but has included the insurance proceeds within the statement of profit or loss and the statement of financial position.

The finance director has informed the audit manager that the October and November bank reconciliations each contained unreconciled differences; however, he considers the overall differences involved to be immaterial.

A directors’ bonus scheme was introduced during the year which is based on achieving a target profit before tax. In order to finalise the bonus figures, the finance director of Venus would like the audit to commence earlier so that the final results are available earlier this year.

Required:

Describe FIVE audit risks, and explain the auditor’s response to each risk, in planning the audit of Venus Magnets Co.

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第11题

Chair Co has developed a new type of luxury car seat. The estimated labour time for the fi

rst unit is 12 hours but a learning curve of 75% is expected to apply for the first eight units produced. The cost of labour is $15 per hour. The cost of materials and other variable overheads is expected to total $230 per unit.

Chair Co plans on pricing the seat by adding a 50% mark-up to the total variable cost per seat, with the labour cost being based on the incremental time taken to produce the 8th unit.

Required:

(a) Calculate the price which Chair Co expects to charge for the new seat. Note: The learning index for a 75% learning curve is –0·415. (5 marks)

(b) The first phase of production has now been completed for the new car seat. The first unit actually took 12·5 hours to make and the total time for the first eight units was 34·3 hours, at which point the learning effect came to an end. Chair Co are planning on adjusting the price to reflect the actual time it took to complete the 8th unit.

Required:

(i) Calculate the actual rate of learning and state whether this means that the labour force actually learnt more quickly or less quickly than expected. (3 marks)

(ii) Briefly explain whether the adjusted price charged by Chair Co will be higher or lower than the price you calculated in part (a) above. You are NOT required to calculate the adjusted price. (2 marks)

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