ACCA考试的报考条件是什么？

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1 ISLAND CO
(a) Briefing Notes
Subject: Principal Audit Risks – Island Co
Revenue Recognition – timing
Island Co raises sales invoices in three stages. There is potential for breach of IAS 18 Revenue, which states that revenue
should only be recognised once the seller has the right to receive it, in other words the seller has performed its contractual
obligations. This right does not necessarily correspond to amounts falling due for payment in accordance with an invoice
schedule agreed with a customer as part of a contract. Island Co appears to receive payment from its customers in advance
of performing any obligation, as the stage one invoice is raised when an order is confirmed i.e. before any work has actually
taken place. This creates the potential for revenue to be recognised too early, in advance of any performance of contractual
obligation. When a payment is received in advance of performance, a liability should be recognised equal to the amount
received, representing the obligation under the contract. Therefore a significant risk is that revenue is overstated and liabilities
understated.
Tutorial note: Equivalent guidance is also provided in IAS 11 Construction Contracts and credit will be awarded where
candidates discuss revenue recognition under IAS 11 as Island Co is providing a single substantial asset for a customer
under the terms of a contract.
Disputed receivable
The amount owed from Jacks Mine Co is highly material as it represents 50·9% of profit before tax, 2·3% of revenue, and
3% of total assets. The risk is that the receivable is overstated if no impairment of the disputed receivable is recognised.
Legal claim
The claim should be investigated seriously by Island Co. The chief executive officer’s (CEO) opinion that the claim will not
result in any financial consequence for Island Co is na?ve and flippant. Damages could be awarded against Island Co if it is
found that the machinery is faulty. The recurring high level of warranty provision implies that machinery faults are fairly
common and therefore the accident could be the result of a defective machine being supplied to Sawyer Co. The risk is that
no provision is created for the potential damages under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, if the
likelihood of paying damages is considered probable. Alternatively, if the likelihood of damages being paid to Sawyer Co is
considered a possibility then a disclosure note should be made in the financial statements describing the nature and possible
financial effect of the contingent liability. As discussed below, the CEO, Kate Shannon, has an incentive not to make a
provision or disclose a contingent liability due to the planned share sale post year end.
A further risk is that any legal fees associated with the claim have not been accrued within the financial statements. As the
claim has arisen during the year, the expense must be included in this year’s income statement, even if the claim is still ongoing
at the year end.
The fact that the legal claim is effectively being ignored may cast doubts on the overall integrity of senior management, and
on the integrity of the financial statements. Management representations should be approached with a degree of professional
scepticism during the audit.
Sawyer Co has cancelled two orders. If the amounts are still outstanding at the year end then it is highly likely that Sawyer
Co will not pay the invoiced amounts, and thus receivables are overstated. If the stage one payments have already been made,
then Sawyer Co may claim a refund, in which case a provision should be made to repay the amount, or a contingent liability
disclosed in a note to the financial statements.
Sawyer Co is one of only five major customers, and losing this customer could have future going concern implications for
Island Co if a new source of revenue cannot be found to replace the lost income stream from Sawyer Co. If the legal claim
becomes public knowledge, and if Island Co is found to have supplied faulty machinery, then it will be difficult to attract new
customers.
A case of this nature could bring bad publicity to Island Co, a potential going concern issue if it results in any of the five key
customers terminating orders with Island Co. The auditors should plan to extend the going concern work programme to
incorporate the issues noted above.
Inventories
Work in progress is material to the financial statements, representing 8·9% of total assets. The inventory count was held two
weeks prior to the year end. There is an inherent risk that the valuation has not been correctly rolled forward to a year end
position.
The key risk is the estimation of the stage of completion of work in progress. This is subjective, and knowledge appears to
be confined to the chief engineer. Inventory could be overvalued if the machines are assessed to be more complete than they
actually are at the year end. Absorption of labour costs and overheads into each machine is a complex calculation and must
be done consistently with previous years.
It will also be important that consumable inventories not yet utilised on a machine, e.g. screws, nuts and bolts, are correctly
valued and included as inventories of raw materials within current assets.
Overseas supplier
As the supplier is new, controls may not yet have been established over the recording of foreign currency transactions.
Inherent risk is high as the trade payable should be retranslated using the year end exchange rate per IAS 21 The Effects of
Changes in Foreign Exchange Rates. If the retranslation is not performed at the year end, the trade payable could be
significantly over or under valued, depending on the movement of the dollar to euro exchange rate between the purchase date
and the year end. The components should remain at historic cost within inventory valuation and should not be retranslated
at the year end.
Warranty provision
The warranty provision is material at 2·6% of total assets (2006 – 2·7%). The provision has increased by only $100,000,
an increase of 4·2%, compared to a revenue increase of 21·4%. This could indicate an underprovision as the percentage
change in revenue would be expected to be in line with the percentage change in the warranty provision, unless significant
improvements had been made to the quality of machines installed for customers during the year. This appears unlikely given
the legal claim by Sawyer Co, and the machines installed at Jacks Mine Co operating inefficiently. The basis of the estimate
could be understated to avoid charging the increase in the provision as an expense through the income statement. This is of
special concern given that it is the CEO and majority shareholder who estimates the warranty provision.
Majority shareholder
Kate Shannon exerts control over Island Co via a majority shareholding, and by holding the position of CEO. This greatly
increases the inherent risk that the financial statements could be deliberately misstated, i.e. overvaluation of assets,
undervaluation of liabilities, and thus overstatement of profits. The risk is severe at this year end as Kate Shannon is hoping
to sell some Island Co shares post year end. As the price that she receives for these shares will be to a large extent influenced
by the balance sheet position of the company at 30 November 2007, she has a definite interest in manipulating the financial
statements for her own personal benefit. For example:
– Not recognising a provision or contingent liability for the legal claim from Sawyer Co
– Not providing for the potentially irrecoverable receivable from Jacks Mines Co
– Not increasing the warranty provision
– Recognising revenue earlier than permitted by IAS 18 Revenue.
Related party transactions
Kate Shannon controls Island Co and also controls Pacific Co. Transactions between the two companies should be disclosed
per IAS 24 Related Party Disclosures. There is risk that not all transactions have been disclosed, or that a transaction has
been disclosed at an inappropriate value. Details of the lease contract between the two companies should be disclosed within
a note to the financial statements, in particular, any amounts owed from Island Co to Pacific Co at 30 November 2007 should
be disclosed.
Other issues
– Kate Shannon wants the audit to be completed as soon as possible, which brings forward the deadline for completion
of the audit. The audit team may not have time to complete all necessary procedures, or there may not be time for
adequate reviews to be carried out on the work performed. Detection risk, and thus audit risk is increased, and the
overall quality of the audit could be jeopardised.
– This is especially important given that this is the first year audit and therefore the audit team will be working with a
steep learning curve. Audit procedures may take longer than originally planned, yet there is little time to extend
procedures where necessary.
– Kate Shannon may also exert considerable influence on the members of the audit team to ensure that the financial
statements show the best possible position of Island Co in view of her share sale. It is crucial that the audit team
members adhere strictly to ethical guidelines and that independence is beyond question.
– Due to the seriousness of the matters noted above, a final matter to be considered at the planning stage is that a second
partner review (Engagement Quality Control Review) should be considered for the audit this year end. A suitable
independent reviewer should be indentified, and time planned and budgeted for at the end of the assignment.
Conclusion
From the range of issues discussed in these briefing notes, it can be seen that the audit of Island Co will be a relatively high
risk engagement.

正确答案：
(b) Sale of industrial equipment
(i) Matters
■ The industrial equipment was in use for nine years (from April 1996) and would have had a carrying value of
$660,000 at 31 March 2005 (11/20 × $1·2m – assuming nil residual value and a full year’s depreciation charge
in the year of acquisition and none in the year of disposal). Disposal proceeds were therefore only $360,000.
■ The $0·3m loss represents 15% of PBT (for the year to 31 March 2006) and is therefore material. The equipment
was material to the balance sheet at 31 March 2005 representing 2·6% of total assets ($0·66/$25·7 × 100).
■ Separate disclosure, of a material loss on disposal, on the face of the income statement is in accordance with
IAS 16 ‘Property, Plant and Equipment’. However, in accordance with IAS 1 ‘Presentation of Financial Statements’,
it should not be captioned in any way that might suggest that it is not part of normal operating activities (i.e. not
‘extraordinary’, ‘exceptional’, etc).
Tutorial note: However, note that if there is a prior period error to be accounted for (see later), there would be
no impact on the current period income statement requiring consideration of any disclosure.
■ The reason for the sale. For example, whether the equipment was:
– surplus to operating requirements (i.e. not being replaced); or
– being replaced with newer equipment (thereby contributing to the $8·1m increase (33·8 – 25·7) in total
assets).
■ The reason for the loss on sale. For example, whether:
– the sale was at an under-value (e.g. to a related party);
– the equipment had a bad maintenance history (or was otherwise impaired);
– the useful life of the equipment is less than 20 years;
– there is any deferred consideration not yet recorded;
– any non-cash disposal proceeds have been overlooked (e.g. if another asset was acquired in a part-exchange).
■ If the useful life was less than 20 years, tangible non-current assets may be materially overstated in respect of other
items of equipment that are still in use and being depreciated on the same basis.
■ If the sale was to a related party then additional disclosure should be required in a note to the financial statements
for the year to 31 March 2006 (IAS 24 ‘Related Party Disclosures’).
Tutorial note: Since there are no specific pointers to a related party transaction (RPT), this point is not expanded
on.
■ Whether the sale was identified in the prior year audit’s post balance sheet event review. If so:
– the disclosure made in the prior year’s financial statements (IAS 10 ‘Events After the Balance Sheet Date’);
– whether an impairment loss was recognised at 31 March 2005.
■ If not, and the equipment was impaired at 31 March 2005, a prior period error should be accounted for (IAS 8
‘Accounting Policies, Changes in Accounting Estimates and Errors’). An impairment loss of $0·3m would have
been material to prior year profit (12·5%).
Tutorial note: Unless this was a RPT or the impairment arose after 31 March 2005 a prior period adjustment
should be made.
■ Failure to account for a prior period error (if any) would result in modification of the audit opinion ‘except for’ noncompliance
with IAS 8 (in the current year) and IAS 36 (in the prior period).
(ii) Audit evidence
■ Carrying amount ($0·66m as above) agreed to the non-current asset register balances at 31 March 2005 and
recalculation of the loss on disposal.
■ Cost and accumulated depreciation removed from the asset register in the year to 31 March 2006.
■ Receipt of proceeds per cash book agreed to bank statement.
■ Sales invoice transferring title to Deakin.
■ A review of maintenance expenses and records (e.g. to confirm reason for loss on sale).
■ Post balance sheet event review on prior year audit working papers file.
■ Management representation confirming that Deakin is not a related party (provided that there is no evidence to
suggest otherwise).

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3 The interview is extensively used for the selection of new employees and in many cases is the only method of selection. However,interviews have been criticised for failing to identify appropriate candidates suitable for the organisation. It is essential therefore that professional accountants recognise both the problems and opportunities that the formal selection interview presents.
(a) The purpose of the selection interview is to find the best possible person for the position who will fit into the organisation. Those conducting the interview must also ensure that the candidate clearly understands the job on offer, career prospects and that all candidates feel that fair treatment has been provided through the selection process.In addition, the interview also gives the opportunity to convey a good impression of the organisation, whether the candidate has been successful or not.