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(iii) Can audit teams cross sell services to their clients? (4 marks)
Required:
For EACH of the three FAQs, explain the threats to objectivity that may arise and the safeguards that should
be available to manage them to an acceptable level.
NOTE: The mark allocation is shown against each of the three questions.
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更多 “ (iii) Can audit teams cross sell services to their clients? (4 marks)Required:For EACH of the three FAQs, explain the threats to objectivity that may arise and the safeguards that shouldbe available to manage them to an acceptable level.NOTE: The mark allocation is shown against each of the three questions. ” 相关考题
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4 All organisations require trained employees. However, training can take many forms, some of which are internal to the organisation.Required:Explain what is meant by the terms:(a) Computer based training. (3 marks)
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6 Communication is important for all organisations and requires an understanding of communication flows and channels.Required:(a) Briefly explain the main purposes of the three main formal communication channels in an organisation:(i) Downwards; (3 marks)
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(b) Ratio analysis in general can be useful in comparing the performance of two companies, but it has its limitations.Required:State and briefly explain three factors which can cause accounting ratios to be misleading when used forsuch comparison. (6 marks)
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(c) In August 2004 it was discovered that the inventory at 31 December 2003 had been overstated by $100,000.(4 marks)Required:Advise the directors on the correct treatment of these matters, stating the relevant accounting standard whichjustifies your answer in each case.NOTE: The mark allocation is shown against each of the three matters.
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(c) Identify TWO QUALITATIVE benefits that might arise as a consequence of the investment in a new IT systemand explain how you would attempt to assess them. (4 marks)
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2 The Information Technology division (IT) of the RJ Business Consulting Group provides consulting services to itsclients as well as to other divisions within the group. Consultants always work in teams of two on every consultingday. Each consulting day is charged to external clients at ￡750 which represents cost plus 150% profit mark up. Thetotal cost per consulting day has been estimated as being 80% variable and 20% fixed.The director of the Human Resources (HR) division of RJ Business Consulting Group has requested the services oftwo teams of consultants from the IT division on five days per week for a period of 48 weeks, and has suggested thatshe meets with the director of the IT division in order to negotiate a transfer price. The director of the IT division hasresponded by stating that he is aware of the limitations of using negotiated transfer prices and intends to charge theHR division ￡750 per consulting day.The IT division always uses ‘state of the art’ video-conferencing equipment on all internal consultations which wouldreduce the variable costs by ￡50 per consulting day. Note: this equipment can only be used when providing internalconsultations.Required:(a) Calculate and discuss the transfer prices per consulting day at which the IT division should provideconsulting services to the HR division in order to ensure that the profit of the RJ Business Consulting Groupis maximised in each of the following situations:(i) Every pair of consultants in the IT division is 100% utilised during the required 48-week period inproviding consulting services to external clients, i.e. there is no spare capacity.(ii) There is one team of consultants who, being free from other commitments, would be available toundertake the provision of services to the HR division during the required 48-week period. All otherteams of consultants would be 100% utilised in providing consulting services to external clients.(iii) A major client has offered to pay the IT division ￡264,000 for the services of two teams of consultantsduring the required 48-week period.(12 marks)
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(b) Explain how growth may be assessed, and critically discuss the advantages and issues that might arise as aresult of a decision by the directors of CSG to pursue the objective of growth. (8 marks)
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(iii) Identify and discuss an alternative strategy that may assist in improving the performance of CTC witheffect from 1 May 2009 (where only the products in (a) and (b) above are available for manufacture).(4 marks)
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(ii) Explain, with reasons, the relief available in respect of the fall in value of the shares in All Over plc,identify the years in which it can be claimed and state the time limit for submitting the claim.(3 marks)
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(c) During the year Albreda paid $0·1 million (2004 – $0·3 million) in fines and penalties relating to breaches ofhealth and safety regulations. These amounts have not been separately disclosed but included in cost of sales.(5 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 Albreda Co for the year ended30 September 2005.NOTE: The mark allocation is shown against each of the three issues.
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4 (a) Explain the auditor’s responsibilities in respect of subsequent events. (5 marks)Required:Identify and comment on the implications of the above matters for the auditor’s report on the financialstatements of Jinack Co for the year ended 30 September 2005 and, where appropriate, the year ending30 September 2006.NOTE: The mark allocation is shown against each of the matters.
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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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(b) The chief executive of Xalam Co, an exporter of specialist equipment, has asked for advice on the accountingtreatment and disclosure of payments made for security consultancy services. The payments, which aim toensure that consignments are not impounded in the destination country of a major customer, may be material tothe financial statements for the year ending 30 June 2006. Xalam does not treat these payments as taxdeductible. (4 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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(b) On 1 April 2004 Volcan introduced a ‘reward scheme’ for its customers. The main elements of the rewardscheme include the awarding of a ‘store point’ to customers’ loyalty cards for every $1 spent, with extra pointsbeing given for the purchase of each week’s special offers. Customers who hold a loyalty card can convert theirpoints into cash discounts against future purchases on the basis of $1 per 100 points. (6 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 Volcan for the year ended31 March 2005.NOTE: The mark allocation is shown against each of the three issues.
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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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(c) Pinzon, a limited liability company and audit client, is threatening to sue your firm in respect of audit fees chargedfor the year ended 31 December 2004. Pinzon is alleging that Bartolome billed the full rate on air fares for auditstaff when substantial discounts had been obtained by Bartolome. (4 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) A sale of industrial equipment to Deakin Co in May 2005 resulted in a loss on disposal of $0·3 million that hasbeen separately disclosed on the face of the income statement. The equipment cost $1·2 million when it waspurchased in April 1996 and was being depreciated on a straight-line basis over 20 years. (6 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 Keffler Co for the year ended31 March 2006.NOTE: The mark allocation is shown against each of the three issues.
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(c) Explain the possible impact of RBG outsourcing its internal audit services on the audit of the financialstatements by Grey Co. (4 marks)
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(b) As a newly-qualified Chartered Certified Accountant in Boleyn Co, you have been assigned to assist the ethicspartner in developing ethical guidance for the firm. In particular, you have been asked to draft guidance on thefollowing frequently asked questions (‘FAQs’) that will be circulated to all staff through Boleyn Co’s intranet:(i) What Information Technology services can we offer to audit clients? (5 marks)Required:For EACH of the three FAQs, explain the threats to objectivity that may arise and the safeguards that shouldbe available to manage them to an acceptable level.NOTE: The mark allocation is shown against each of the three questions.
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(ii) Can we entertain our clients as a gesture of goodwill or is corporate hospitality ruled out? (3 marks)Required:For EACH of the three FAQs, explain the threats to objectivity that may arise and the safeguards that shouldbe available to manage them to an acceptable level.NOTE: The mark allocation is shown against each of the three questions.
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(b) While the refrigeration units were undergoing modernisation Lamont outsourced all its cold storage requirementsto Hogg Warehousing Services. At 31 March 2007 it was not possible to physically inspect Lamont’s inventoryheld by Hogg due to health and safety requirements preventing unauthorised access to cold storage areas.Lamont’s management has provided written representation that inventory held at 31 March 2007 was$10·1 million (2006 – $6·7 million). This amount has been agreed to a costing of Hogg’s monthly return ofquantities held at 31 March 2007. (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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4 (a) ISA 701 Modifications to The Independent Auditor’s Report includes ‘suggested wording of modifying phrasesfor use when issuing modified reports’.Required:Explain and distinguish between each of the following terms:(i) ‘qualified opinion’;(ii) ‘disclaimer of opinion’;(iii) ‘emphasis of matter paragraph’. (6 marks)
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(b) As a newly-qualified Chartered Certified Accountant, you have been asked to write an ‘ethics column’ for a traineeaccountant magazine. In particular, you have been asked to draft guidance on the following questions addressedto the magazine’s helpline:(i) What gifts or hospitality are acceptable and when do they become an inducement? (5 marks)Required:For each of the three questions, explain the threats to objectivity that may arise and the safeguards thatshould be available to manage them to an acceptable level.NOTE: The mark allocation is shown against each of the three questions above.
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(ii) If a partner, who is an actuary, provides valuation services to an audit client, can we continue with the audit?(3 marks)Required:For each of the three questions, explain the threats to objectivity that may arise and the safeguards thatshould be available to manage them to an acceptable level.NOTE: The mark allocation is shown against each of the three questions above.
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(iii) Can internal audit services be undertaken for an audit client? (4 marks)Required:For each of the three questions, explain the threats to objectivity that may arise and the safeguards thatshould be available to manage them to an acceptable level.NOTE: The mark allocation is shown against each of the three questions above.
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(a) List and explain FOUR methods of selecting a sample of items to test from a population in accordance with ISA 530 (Redrafted) Audit Sampling and Other Means of Testing. (4 marks)(b) List and explain FOUR assertions from ISA 500 Audit Evidence that relate to the recording of classes oftransactions. (4 marks)(c) In terms of audit reports, explain the term ‘modified’. (2 marks)
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Following a competitive tender, your audit firm Cal Co has just gained a new audit client Tirrol Co. You are the manager in charge of planning the audit work. Tirrol Co’s year end is 30 June 2009 with a scheduled date to complete the audit of 15 August 2009. The date now is 3 June 2009.Tirrol Co provides repair services to motor vehicles from 25 different locations. All inventory, sales and purchasing systems are computerised, with each location maintaining its own computer system. The software in each location isthe same because the programs were written specifically for Tirrol Co by a reputable software house. Data from each location is amalgamated on a monthly basis at Tirrol Co’s head office to produce management and financial accounts.You are currently planning your audit approach for Tirrol Co. One option being considered is to re-write Cal Co’s audit software to interrogate the computerised inventory systems in each location of Tirrol Co (except for head office)as part of inventory valuation testing. However, you have also been informed that any computer testing will have to be on a live basis and you are aware that July is a major holiday period for your audit firm.Required:(a) (i) Explain the benefits of using audit software in the audit of Tirrol Co; (4 marks)(ii) Explain the problems that may be encountered in the audit of Tirrol Co and for each problem, explainhow that problem could be overcome. (10 marks)(b) Following a discussion with the management at Tirrol Co you now understand that the internal audit department are prepared to assist with the statutory audit. Specifically, the chief internal auditor is prepared to provide you with documentation on the computerised inventory systems at Tirrol Co. The documentation provides details of the software and shows diagrammatically how transactions are processed through the inventory system. This documentation can be used to significantly decrease the time needed to understand the computer systems and enable audit software to be written for this year’s audit.Required:Explain how you will evaluate the computer systems documentation produced by the internal auditdepartment in order to place reliance on it during your audit. (6 marks)
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