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(b) You are an audit manager with specific responsibility for reviewing other information in documents containing
audited financial statements before your firm’s auditor’s report is signed. The financial statements of Hegas, a
privately-owned civil engineering company, show total assets of $120 million, revenue of $261 million, and profit
before tax of $9·2 million for the year ended 31 March 2005. Your review of the Annual Report has revealed
the following:
(i) The statement of changes in equity includes $4·5 million under a separate heading of ‘miscellaneous item’
which is described as ‘other difference not recognized in income’. There is no further reference to this
amount or ‘other difference’ elsewhere in the financial statements. However, the Management Report, which
is required by statute, is not audited. It discloses that ‘changes in shareholders’ equity not recognized in
income includes $4·5 million arising on the revaluation of investment properties’.
The notes to the financial statements state that the company has implemented IAS 40 ‘Investment Property’
for the first time in the year to 31 March 2005 and also that ‘the adoption of this standard did not have a
significant impact on Hegas’s financial position or its results of operations during 2005’.
(ii) The chairman’s statement asserts ‘Hegas has now achieved a position as one of the world’s largest
generators of hydro-electricity, with a dedicated commitment to accountable ethical professionalism’. Audit
working papers show that 14% of revenue was derived from hydro-electricity (2004: 12%). Publicly
available information shows that there are seven international suppliers of hydro-electricity in Africa alone,
which are all at least three times the size of Hegas in terms of both annual turnover and population supplied.
Required:
Identify and comment on the implications of the above matters for the auditor’s report on the financial
statements of Hegas for the year ended 31 March 2005. (10 marks)
参考答案
更多 “ (b) You are an audit manager with specific responsibility for reviewing other information in documents containingaudited financial statements before your firm’s auditor’s report is signed. The financial statements of Hegas, aprivately-owned civil engineering company, show total assets of $120 million, revenue of $261 million, and profitbefore tax of $9·2 million for the year ended 31 March 2005. Your review of the Annual Report has revealedthe following:(i) The statement of changes in equity includes $4·5 million under a separate heading of ‘miscellaneous item’which is described as ‘other difference not recognized in income’. There is no further reference to thisamount or ‘other difference’ elsewhere in the financial statements. However, the Management Report, whichis required by statute, is not audited. It discloses that ‘changes in shareholders’ equity not recognized inincome includes $4·5 million arising on the revaluation of investment properties’.The notes to the financial statements state that the company has implemented IAS 40 ‘Investment Property’for the first time in the year to 31 March 2005 and also that ‘the adoption of this standard did not have asignificant impact on Hegas’s financial position or its results of operations during 2005’.(ii) The chairman’s statement asserts ‘Hegas has now achieved a position as one of the world’s largestgenerators of hydro-electricity, with a dedicated commitment to accountable ethical professionalism’. Auditworking papers show that 14% of revenue was derived from hydro-electricity (2004: 12%). Publiclyavailable information shows that there are seven international suppliers of hydro-electricity in Africa alone,which are all at least three times the size of Hegas in terms of both annual turnover and population supplied.Required:Identify and comment on the implications of the above matters for the auditor’s report on the financialstatements of Hegas for the year ended 31 March 2005. (10 marks) ” 相关考题
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Which of the following financial statements reports information as of a specific date? ()
A. income statementB. statement of owner's equityC. statement of cash flowsD. balance sheet
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(b) Discuss the relative costs to the preparer and benefits to the users of financial statements of increaseddisclosure of information in financial statements. (14 marks)Quality of discussion and reasoning. (2 marks)
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5 You are an audit manager in Dedza, a firm of Chartered Certified Accountants. Recently, you have been assignedspecific responsibility for undertaking annual reviews of existing clients. The following situations have arisen inconnection with three client companies:(a) Dedza was appointed auditor and tax advisor to Kora Co, a limited liability company, last year and has recentlyissued an unmodified opinion on the financial statements for the year ended 30 June 2005. To your surprise,the tax authority has just launched an investigation into the affairs of Kora on suspicion of underdeclaring income.(7 marks)Required:Identify and comment on the ethical and other professional issues raised by each of these matters and state whataction, if any, Dedza should now take.NOTE: The mark allocation is shown against each of the three situations.
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4 (a) Explain the auditor’s responsibilities for other information in documents containing audited financialstatements. (5 marks)
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5 You are an audit manager in Bartolome, a firm of Chartered Certified Accountants. You have specific responsibilityfor 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 liabilitycompany, for the year ending 30 June 2005. Moreno’s Chief Executive Officer, James Bay, has just sent you ane-mail to advise you that Leon has been short-listed for the position of Finance Director. You were not previouslyaware 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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(b) Chatam, a limited liability company, is a long-standing client. One of its subsidiaries, Ayora, has made lossesfor several years. At your firm’s request, Chatam’s management has made a written representation that goodwillarising on the acquisition of Ayora is not impaired. Your firm’s auditor’s report on the consolidated financialstatements of Chatam for the year ended 31 March 2005 is unmodified. Your firm’s auditor’s report on thefinancial statements of Ayora is similarly unmodified. Chatam’s Chief Executive, Charles Barrington, is due toretire in 2006 when his share options mature. (6 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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4 (a) The purpose of ISA 510 ‘Initial Engagements – Opening Balances’ is to establish standards and provide guidanceregarding opening balances when the financial statements are audited for the first time or when the financialstatements for the prior period were audited by another auditor.Required:Explain the auditor’s reporting responsibilities that are specific to initial engagements. (5 marks)
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(b) You are the audit manager of Johnston Co, a private company. The draft consolidated financial statements forthe year ended 31 March 2006 show profit before taxation of $10·5 million (2005 – $9·4 million) and totalassets 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 March2006. 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’sreport 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 forthe year ended 31 March 2006:(i) In December 2004 Tiltman installed a new computer system that properly quantified an overvaluation ofinventory 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 millionhave 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 financialstatements of Johnston Co and Tiltman Co for the year ended 31 March 2006. (10 marks)
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5 You are an audit manager in Fox Steeple, a firm of Chartered Certified Accountants, responsible for allocating staffto the following three audits of financial statements for the year ending 31 December 2006:(a) Blythe Co is a new audit client. This private company is a local manufacturer and distributor of sportswear. Thecompany’s finance director, Peter, sees little value in the audit and put it out to tender last year as a cost-cuttingexercise. In accordance with the requirements of the invitation to tender your firm indicated that there would notbe an interim audit.(b) Huggins Co, a long-standing client, operates a national supermarket chain. Your firm provided Huggins Co withcorporate financial advice on obtaining a listing on a recognised stock exchange in 2005. Senior managementexpects a thorough examination of the company’s computerised systems, and are also seeking assurance thatthe annual report will not attract adverse criticism.(c) Gray Co has been an audit client since 1999 after your firm advised management on a successful buyout. Grayprovides communication services and software solutions. Your firm provides Gray with technical advice onfinancial reporting and tax services. Most recently you have been asked to conduct due diligence reviews onpotential acquisitions.Required:For these assignments, compare and contrast:(i) the threats to independence;(ii) the other professional and practical matters that arise; and(iii) the implications for allocating staff.(15 marks)
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(b) Seymour offers health-related information services through a wholly-owned subsidiary, Aragon Co. Goodwill of$1·8 million recognised on the purchase of Aragon in October 2004 is not amortised but included at cost in theconsolidated balance sheet. At 30 September 2006 Seymour’s investment in Aragon is shown at cost,$4·5 million, in its separate financial statements.Aragon’s draft financial statements for the year ended 30 September 2006 show a loss before taxation of$0·6 million (2005 – $0·5 million loss) and total assets of $4·9 million (2005 – $5·7 million). The notes toAragon’s financial statements disclose that they have been prepared on a going concern basis that assumes thatSeymour will continue to provide financial support. (7 marks)Required:For each of the above issues:(i) comment on the matters that you should consider; and(ii) state the audit evidence that you should expect to find,in undertaking your review of the audit working papers and financial statements of Seymour Co for the year ended30 September 2006.NOTE: The mark allocation is shown against each of the three issues.
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4 (a) The purpose of ISA 250 Consideration of Laws and Regulations in an Audit of Financial Statements is toestablish standards and provide guidance on the auditor’s responsibility to consider laws and regulations in anaudit of financial statements.Explain the auditor’s responsibilities for reporting non-compliance that comes to the auditor’s attentionduring the conduct of an audit. (5 marks)
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(b) You are an audit manager in a firm of Chartered Certified Accountants currently assigned to the audit of CleevesCo for the year ended 30 September 2006. During the year Cleeves acquired a 100% interest in Howard Co.Howard is material to Cleeves and audited by another firm, Parr Co. You have just received Parr’s draftauditor’s report for the year ended 30 September 2006. The wording is that of an unmodified report except forthe opinion paragraph which is as follows:Audit opinionAs more fully explained in notes 11 and 15 impairment losses on non-current assets have not beenrecognised in profit or loss as the directors are unable to quantify the amounts.In our opinion, provision should be made for these as required by International Accounting Standard 36(Impairment). If the provision had been so recognised the effect would have been to increase the loss beforeand after tax for the year and to reduce the value of tangible and intangible non-current assets. However,as the directors are unable to quantify the amounts we are unable to indicate the financial effect of suchomissions.In view of the failure to provide for the impairments referred to above, in our opinion the financial statementsdo not present fairly in all material respects the financial position of Howard Co as of 30 September 2006and of its loss and its cash flows for the year then ended in accordance with International Financial ReportingStandards.Your review of the prior year auditor’s report shows that the 2005 audit opinion was worded identically.Required:(i) Critically appraise the appropriateness of the audit opinion given by Parr Co on the financialstatements of Howard Co, for the years ended 30 September 2006 and 2005. (7 marks)
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3 You are the manager responsible for the audit of Lamont Co. The company’s principal activity is wholesaling frozenfish. The draft consolidated financial statements for the year ended 31 March 2007 show revenue of $67·0 million(2006 – $62·3 million), profit before taxation of $11·9 million (2006 – $14·2 million) and total assets of$48·0 million (2006 – $36·4 million).The following issues arising during the final audit have been noted on a schedule of points for your attention:(a) In early 2007 a chemical leakage from refrigeration units owned by Lamont caused contamination of some of itsproperty. Lamont has incurred $0·3 million in clean up costs, $0·6 million in modernisation of the units toprevent future leakage and a $30,000 fine to a regulatory agency. Apart from the fine, which has been expensed,these costs have been capitalised as improvements. (7 marks)Required:For each of the above issues:(i) comment on the matters that you should consider; and(ii) state the audit evidence that you should expect to find,in undertaking your review of the audit working papers and financial statements of Lamont Co for the year ended31 March 2007.NOTE: The mark allocation is shown against each of the three issues.
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(ii) On 1 July 2006 Petrie introduced a 10-year warranty on all sales of its entire range of stainless steelcookware. Sales of stainless steel cookware for the year ended 31 March 2007 totalled $18·2 million. Thenotes to the financial statements disclose the following:‘Since 1 July 2006, the company’s stainless steel cookware is guaranteed to be free from defects inmaterials and workmanship under normal household use within a 10-year guarantee period. No provisionhas been recognised as the amount of the obligation cannot be measured with sufficient reliability.’(4 marks)Your auditor’s report on the financial statements for the year ended 31 March 2006 was unmodified.Required:Identify and comment on the implications of these two matters for your auditor’s report on the financialstatements of Petrie Co for the year ended 31 March 2007.NOTE: The mark allocation is shown against each of the matters above.
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6 Proposed ISA 600 (Revised and Redrafted) The Audit of Group Financial Statements is likely to substantially increasethe formal requirements in the area of group audits.Required:(a) Outline the significant issues that are being addressed in the IAASB’s project on group audits. (5 marks)
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4 You are an audit manager in Nate Co, a firm of Chartered Certified Accountants. You 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 theappointment and is currently carrying out client acceptance procedures. Fisher Co was recently incorporated byMarcellus 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 oferrors in the recording of cash deposits from new customers that have been discovered by CF Co’s internal auditteam, the directors of CF Co have requested that your firm carry out a review of the financial informationtechnology 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 hoursproviding advice to the internal audit team about how to improve the system. As far as you know, this advice hasnot 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. Twoaudit juniors attended the annual inventory count last Monday. They reported that Brenda Mangle, the newproduction manager of LA Shots Co, wanted the inventory count and audit procedures performed as quickly aspossible. As an incentive she offered the two juniors ten free bottles of ‘Super Juice’ from the end of theproduction line. Brenda also invited them to join the LA Shots Co office party, which commenced at the end ofthe inventory count. The inventory count and audit procedures were completed within two hours (the previousyear’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 consideredbefore, and on the acceptance of, the audit appointment of Fisher Co. (5 marks)
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5 You are the audit manager for three clients of Bertie Co, a firm of Chartered Certified Accountants. The financialyear end for each client is 30 September 2007.You are reviewing the audit senior’s proposed audit reports for two clients, Alpha Co and Deema Co.Alpha Co, a listed company, permanently closed several factories in May 2007, with all costs of closure finalised andpaid in August 2007. The factories all produced the same item, which contributed 10% of Alpha Co’s total revenuefor the year ended 30 September 2007 (2006 – 23%). The closure has been discussed accurately and fully in thechairman’s statement and Directors’ Report. However, the closure is not mentioned in the notes to the financialstatements, nor separately disclosed on the financial statements.The audit senior has proposed an unmodified audit opinion for Alpha Co as the matter has been fully addressed inthe chairman’s statement and Directors’ Report.In October 2007 a legal claim was filed against Deema Co, a retailer of toys. The claim is from a customer who slippedon a greasy step outside one of the retail outlets. The matter has been fully disclosed as a material contingent liabilityin the notes to the financial statements, and audit working papers provide sufficient evidence that no provision isnecessary as Deema Co’s lawyers have stated in writing that the likelihood of the claim succeeding is only possible.The amount of the claim is fixed and is adequately covered by cash resources.The audit senior proposes that the audit opinion for Deema Co should not be qualified, but that an emphasis of matterparagraph should be included after the audit opinion to highlight the situation.Hugh Co was incorporated in October 2006, using a bank loan for finance. Revenue for the first year of trading is$750,000, and there are hopes of rapid growth in the next few years. The business retails luxury hand made woodentoys, currently in a single retail outlet. The two directors (who also own all of the shares in Hugh Co) are aware thatdue to the small size of the company, the financial statements do not have to be subject to annual external audit, butthey are unsure whether there would be any benefit in a voluntary audit of the first year financial statements. Thedirectors are also aware that a review of the financial statements could be performed as an alternative to a full audit.Hugh Co currently employs a part-time, part-qualified accountant, Monty Parkes, who has prepared a year endbalance sheet and income statement, and who produces summary management accounts every three months.Required:(a) Evaluate whether the audit senior’s proposed audit report is appropriate, and where you disagree with theproposed report, recommend the amendment necessary to the audit report of:(i) Alpha Co; (6 marks)
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(c) With specific reference to Hugh Co, discuss the objective of a review engagement and contrast the level ofassurance provided with that provided in an audit of financial statements. (6 marks)
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You are the manager responsible for performing hot reviews on audit files where there is a potential disagreementbetween your firm and the client regarding a material issue. You are reviewing the going concern section of the auditfile of Dexter Co, a client with considerable cash flow difficulties, and other, less significant operational indicators ofgoing concern problems. The working papers indicate that Dexter Co is currently trying to raise finance to fundoperating cash flows, and state that if the finance is not received, there is significant doubt over the going concernstatus of the company. The working papers conclude that the going concern assumption is appropriate, but it isrecommended that the financial statements should contain a note explaining the cash flow problems faced by thecompany, along with a description of the finance being sought, and an evaluation of the going concern status of thecompany. 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 thenote to the financial statements. (5 marks)
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You are an audit manager responsible for providing hot reviews on selected audit clients within your firm of CharteredCertified Accountants. You are currently reviewing the audit working papers for Pulp Co, a long standing audit client,for the year ended 31 January 2008. The draft statement of financial position (balance sheet) of Pulp Co shows totalassets of $12 million (2007 – $11·5 million).The audit senior has made the following comment in a summary ofissues for your review:‘Pulp Co’s statement of financial position (balance sheet) shows a receivable classified as a current asset with a valueof $25,000. The only audit evidence we have requested and obtained is a management representation stating thefollowing:(1) that the amount is owed to Pulp Co from Jarvis Co,(2) that Jarvis Co is controlled by Pulp Co’s chairman, Peter Sheffield, and(3) that the balance is likely to be received six months after Pulp Co’s year end.The receivable was also outstanding at the last year end when an identical management representation was provided,and our working papers noted that because the balance was immaterial no further work was considered necessary.No disclosure has been made in the financial statements regarding the balance. Jarvis Co is not audited by our firmand we have verified that Pulp Co does not own any shares in Jarvis Co.’Required:(b) In relation to the receivable recognised on the statement of financial position (balance sheet) of Pulp Co asat 31 January 2008:(i) Comment on the matters you should consider. (5 marks)
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4 You are an audit manager in Smith Co, a firm of Chartered Certified Accountants. You have recently been maderesponsible for reviewing invoices raised to clients and for monitoring your firm’s credit control procedures. Severalmatters came to light during your most recent review of client invoice files:Norman Co, a large private company, has not paid an invoice from Smith Co dated 5 June 2007 for work in respectof the financial statement audit for the year ended 28 February 2007. A file note dated 30 November 2007 statesthat Norman Co is suffering poor cash flows and is unable to pay the balance. This is the only piece of informationin the file you are reviewing relating to the invoice. You are aware that the final audit work for the year ended28 February 2008, which has not yet been invoiced, is nearly complete and the audit report is due to be issuedimminently.Wallace Co, a private company whose business is the manufacture of industrial machinery, has paid all invoicesrelating to the recently completed audit planning for the year ended 31 May 2008. However, in the invoice file younotice an invoice received by your firm from Wallace Co. The invoice is addressed to Valerie Hobson, the managerresponsible for the audit of Wallace Co. The invoice relates to the rental of an area in Wallace Co’s empty warehouse,with the following comment handwritten on the invoice: ‘rental space being used for storage of Ms Hobson’sspeedboat for six months – she is our auditor, so only charge a nominal sum of $100’. When asked about the invoice,Valerie Hobson said that the invoice should have been sent to her private address. You are aware that Wallace Cosometimes uses the empty warehouse for rental income, though this is not the main trading income of the company.In the ‘miscellaneous invoices raised’ file, an invoice dated last week has been raised to Software Supply Co, not aclient of your firm. The comment box on the invoice contains the note ‘referral fee for recommending Software SupplyCo to several audit clients regarding the supply of bespoke accounting software’.Required:Identify and discuss the ethical and other professional issues raised by the invoice file review, and recommendwhat action, if any, Smith Co should now take in respect of:(a) Norman Co; (8 marks)
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The finance director of Blod Co, Uma Thorton, has requested that your firm type the financial statements in the formto be presented to shareholders at the forthcoming company general meeting. Uma has also commented that theprevious auditors did not use a liability disclaimer in their audit report, and would like more information about the useof liability disclaimer paragraphs.Required:(b) Discuss the ethical issues raised by the request for your firm to type the financial statements of Blod Co.(3 marks)
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听力原文：M: There are several reasons why careful analysis of financial statements is necessary. What are they?W: First, financial statements are general-purpose statements. Secondly, the relationships between amounts on successive financial statements are not obvious without analysis. And thirdly, users of financial statements may be interested in seeing how well a company is performing.Q: What are they talking about?(17)A．The methods of financial statements.B．The necessity of careful analysis of financial statementsC．The relationship among financial statements.D．The purpose of financial statements.
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One of your audit clients is Tye Co a company providing petrol, aviation fuel and similar oil based products to the government of the country it is based in. Although the company is not listed on any stock exchange, it does follow best practice regarding corporate governance regulations. The audit work for this year is complete, apart from the matter referred to below.As part of Tye Co’s service contract with the government, it is required to hold an emergency inventory reserve of 6,000 barrels of aviation fuel. The inventory is to be used if the supply of aviation fuel is interrupted due to unforeseen events such as natural disaster or terrorist activity.This fuel has in the past been valued at its cost price of $15 a barrel. The current value of aviation fuel is $120 a barrel. Although the audit work is complete, as noted above, the directors of Tye Co have now decided to show the ‘real’ value of this closing inventory in the financial statements by valuing closing inventory of fuel at market value, which does not comply with relevant accounting standards. The draft financial statements of Tye Co currently show a profit of approximately $500,000 with net assets of $170 million.Required:(a) List the audit procedures and actions that you should now take in respect of the above matter. (6 marks)(b) For the purposes of this section assume from part (a) that the directors have agreed to value inventory at$15/barrel.Having investigated the matter in part (a) above, the directors present you with an amended set of financialstatements showing the emergency reserve stated not at 6,000 barrels, but reported as 60,000 barrels. The final financial statements now show a profit following the inclusion of another 54,000 barrels of oil in inventory. When queried about the change from 6,000 to 60,000 barrels of inventory, the finance director stated that this change was made to meet expected amendments to emergency reserve requirements to be published in about six months time. The inventory will be purchased this year, and no liability will be shown in the financial statements for this future purchase. The finance director also pointed out that part of Tye Co’s contract with the government requires Tye Co to disclose an annual profit and that a review of bank loans is due in three months. Finally the finance director stated that if your audit firm qualifies the financial statements in respect of the increase in inventory, they will not be recommended for re-appointment at the annual general meeting. The finance director refuses to amend the financial statements to remove this ‘fictitious’ inventory.Required:(i) State the external auditor’s responsibilities regarding the detection of fraud; (4 marks)(ii) Discuss to which groups the auditors of Tye Co could report the ‘fictitious’ aviation fuel inventory;(6 marks)(iii) Discuss the safeguards that the auditors of Tye Co can use in an attempt to overcome the intimidationthreat from the directors of Tye Co. (4 marks)
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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 ParagraphWe 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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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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You are using Windows 2000 Professional on your desktop computer. You are working on the company’s financial report and you want other users on the network to able to modify your documents for the report. You want users to share the financial report folder on the network. Because the network contains confidential information you want to prevent users from the enabling off line access for the network share that contains the financial report. What should you do？（）A、Use Windows Explorer to receive the offline filesB、Using the Windows Explorer, disable the cache for the reports on the network shareC、Use the Windows NT explorer to grant the special access for the reports on the network shareD、Use the synchronization manager to configure synchronization not to occur when users are connected to the LAN connection.
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