国际注册会计师的前景如何？

You are the manager responsible for performing hot reviews on audit files where there is a potential disagreement

between your firm and the client regarding a material issue. You are reviewing the going concern section of the audit

file of Dexter Co, a client with considerable cash flow difficulties, and other, less significant operational indicators of

going concern problems. The working papers indicate that Dexter Co is currently trying to raise finance to fund

operating cash flows, and state that if the finance is not received, there is significant doubt over the going concern

status of the company. The working papers conclude that the going concern assumption is appropriate, but it is

recommended that the financial statements should contain a note explaining the cash flow problems faced by the

company, along with a description of the finance being sought, and an evaluation of the going concern status of the

company. The directors do not wish to include the note in the financial statements.

Required:

(b) Consider and comment on the possible reasons why the directors of Dexter Co are reluctant to provide the

note to the financial statements. (5 marks)

Cherry Blossom Co (Cherry) manufactures custom made furniture and its year end is 30 April. The company purchases its raw materials from a wide range of suppliers. Below is a description of Cherry’s purchasing system.

When production supervisors require raw materials, they complete a requisition form. and this is submitted to the purchase ordering department. Requisition forms do not require authorisation and no reference is made to the current inventory levels of the materials being requested. Staff in the purchase ordering department use the requisitions to raise sequentially numbered purchase orders based on the approved suppliers list, which was last updated 24 months ago. The purchasing director authorises the orders prior to these being sent to the suppliers.

When the goods are received, the warehouse department verifies the quantity to the suppliers despatch note and checks that the quality of the goods received are satisfactory. They complete a sequentially numbered goods received note (GRN) and send a copy of the GRN to the finance department.

Purchase invoices are sent directly to the purchase ledger clerk, who stores them in a manual file until the end of each week. He then inputs them into the purchase ledger using batch controls and gives each invoice a unique number based on the supplier code. The invoices are reviewed and authorised for payment by the finance director, but the actual payment is only made 60 days after the invoice is input into the system.

Required:

In respect of the purchasing system of Cherry Blossom Co:

(i) Identify and explain FIVE deficiencies; and

(ii) Recommend a control to address each of these deficiencies.

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

8 Which of the following statements about accounting concepts and conventions are correct?

(1) The money measurement concept requires all assets and liabilities to be accounted for at historical cost.

(2) The substance over form. convention means that the economic substance of a transaction should be reflected in

the financial statements, not necessarily its legal form.

(3) The realisation concept means that profits or gains cannot normally be recognised in the income statement until

realised.

(4) The application of the prudence concept means that assets must be understated and liabilities must be overstated

in preparing financial statements.

A 1 and 3

B 2 and 3

C 2 and 4

D 1 and 4.

(b) Peter, one of Linden Limited’s non-executive directors, having lived and worked in the UK for most of his adult

life, sold his home near London on 22 March 2006 and, together with his wife (a French citizen), moved to live

in a villa which she owns in the south of France. Peter is now demanding that the tax deducted from his director’s

fees, for the board meetings held on 18 April and 16 May 2006, be refunded, on the grounds that, as he is no

longer resident in the UK, he is no longer liable to UK income tax. All of the company’s board meetings are held

at its offices in Cambridge.

Despite Peter’s assurance that none of the other companies of which he is a director has disputed his change of

tax status, Damian is uncertain whether he should make the refunds requested. However, as Peter is a friend of

the company’s founder, Linden Limited’s managing director is urging him to do so, stating that if the tax does

have to be paid, then Linden Limited could always bear the cost.

Required:

Advise Damian whether Peter is correct in his assertion regarding his tax position and in the case that there

is a UK tax liability the implications of the managing director’s suggestion. You are not required to consider

national insurance (NIC) issues. (4 marks)