---He asked _____ for the computer. ---But I didn’t tell him.
A、did I pay how much
B、I paid how much
C、how much did I pay
D、how much I paid
A、did I pay how much
B、I paid how much
C、how much did I pay
D、how much I paid
The following scenario relates to questions 1–5
You are an audit manager at Horti & Co and you are considering a number of ethical issues which have arisen on some of the firm’s long-standing audit clients.
Tree Co Horti & Co is planning its external audit of Tree Co. Yesterday, the audit engagement partner, Charlie Thrower, discovered that a significant fee for information security services, which were provided to Tree Co by Horti & Co, is overdue. Charlie hopes to be able to resolve the dispute amicably and has confirmed that he will discuss the matter with the finance director,
Percy Marsh, at the weekend, as they are both attending a party to celebrate the engagement of Charlie’s daughter and Percy’s son. Bush Co
Horti & Co is the external auditor of Bush Co and also provides other non-audit services to the company. While performing the audit for the year ended 31 October 20X8, the audit engagement partner was taken ill and took an indefinite leave of absence from the firm. The ethics partner has identified the following potential replacements and is keen that independence is maintained to the highest level:
Brian Smith who is also the partner in charge of the tax services provided to Bush Co
Monty Nod who was the audit engagement partner for the ten years ended 31 October 20X7
Cassie Dixon who introduced Bush Co as a client when she joined the firm as an audit partner five years ago
Pete Russo who is also the partner in charge of the payroll services provided to Bush Co
Plant Co
Plant Co is a large private company, with a financial year to 30 June, and has been an audit client of Horti & Co for several years. Alan Marshlow, a partner of Horti & Co, has acted as the engagement quality control reviewer (EQCR) on the last two
audits to the year ended 30 June 20X8. At a recent meeting, he advised that he can no longer be EQCR on the engagement as he is considering accepting appointment as a non-executive director and will sit on the audit committee of Plant Co.
The board of directors has also asked Horti & Co if they would be able to provide internal audit services to the company.
Weed Co
Weed Co, a listed company, is one of Horti & Co’s largest clients. Last year the fee for audit and other services was $1·2m and this year it is expected to be $1·3m which represents 16·6% and 18·1% of Horti & Co’s total income respectively.
3. Which of the following correctly identifies the threats to Horti & Co’s independence and proposes an appropriate course of action for the firm if Alan Marshlow accepts appointment as a non-executive director of Plant Co?
Threats Course of action
A.Self-interest and familiarity Can continue with appropriate safeguards
B.Self-interest and self-review Must resign as auditor
C.Self-review and familiarity Must resign as auditor
D.Familiarity only Can continue with appropriate safeguards
4. You are separately considering Plant Co’s request to provide internal audit services and the remit of these services if they are accepted.
Which of the following would result in Horti & Co assuming a management responsibility in relation to the internal audit services?
(1) Taking responsibility for designing and maintaining internal control systems
(2) Determining which recommendations should take priority and be implemented
(3) Determining the reliance which can be placed on the work of internal audit for the external audit
(4) Setting the scope of the internal audit work to be carried out
A.1 and 3
B.2, 3 and 4
C.1, 2 and 4
D.3 and 4 only
(a) Delhi Co, a potential new client, is a privately owned and rapidly expanding company which currently operates below the audit threshold in the country in which it is based. The company’s management is currently considering having either a full audit or a limited assurance review of their financial statements. The partner would like you to assist the management of Delhi Co by writing a response to them in which you:
(i) Explain the difference between an audit of historical financial statements and a limited assurance review. (4 marks)
(ii) Discuss the relative advantages and disadvantages to Delhi Co of having an audit of their historical financial statements as opposed to a limited assurance review. (8 marks)
Delhi Co was incorporated in 2005, with founder and chief executive Mr Nimesh Dattani as the sole shareholder. After a period of rapid growth, Delhi Co took out a ten-year bank loan facility in June 2007 to finance Mr Dattani’s ambitious expansion plans. This was supported by a further injection of financial capital in 2014 through a new issue of shares in the company. The shares were sold to Mr Robert Hyland, an ex-business partner of Mr Dattani. The sale gave Mr Hyland a 40% shareholding in Delhi Co. He has no involvement in the management of the company.
Until recently Delhi Co operated with a small accounting department, comprising one full-time member of staff and one part-time employee. Due to the expansion of the company and Mr Dattani’s plans to expand the customer base internationally, it has been necessary to increase the size of the accounting function to include two new full-time members of staff. Both of the new recruits are part-qualified accountants and Mr Dattani has committed to sponsoring them through their remaining training and ACCA examinations.
Required:
Prepare the response to the management of Delhi Co as requested by the partner.
Note: The split of the mark allocation is shown against each of the issues above.
(b) The audit committee of another client, Mumbai Co, has asked the partner to consider whether it would be possible for the audit team to perform. a review of the company’s internal control system. A number of recent incidents have raised concerns amongst the management team that controls have deteriorated and that this has increased the risk of fraud, as well as inefficient commercial practices. The audit report for the audit of the financial statements of Mumbai Co for the year ended 31 March 2016 was signed a few weeks ago. Mumbai Co is a listed company.
Required:
In respect of the request for Chennai & Co to review Mumbai Co’s internal control systems: Identify and discuss the relevant ethical and professional issues raised, and recommend any actions necessary. (8 marks)
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)
Section B – TWO questions ONLY to be attempted
(a) You are a manager in Lark & Co, responsible for the audit of Heron Co, an owner-managed business which operates a chain of bars and restaurants. This is your firm’s first year auditing the client and the audit for the year ended 31 March 2012 is underway. The audit senior sends a note for your attention:
‘When I was auditing revenue I noticed something strange. Heron Co’s revenue, which is almost entirely cash-based, is recognised at $5·5 million in the draft financial statements. However, the accounting system shows that till receipts for cash paid by customers amount to only $3·5 million. This seemed odd, so I questioned Ava Gull, the financial controller about this. She said that Jack Heron, the company’s owner, deals with cash receipts and posts through journals dealing with cash and revenue. Ava asked Jack the reason for these journals but he refused to give an explanation.
‘While auditing cash, I noticed a payment of $2 million made by electronic transfer from the company’s bank account to an overseas financial institution. The bank statement showed that the transfer was authorised by Jack Heron, but no other documentation regarding the transfer was available.
‘Alarmed by the size of this transaction, and the lack of evidence to support it, I questioned Jack Heron, asking him about the source of cash receipts and the reason for electronic transfer. He would not give any answers and became quite aggressive.’
Required:
(i) Discuss the implications of the circumstances described in the audit senior’s note; and (6 marks)
(ii) Explain the nature of any reporting that should take place by the audit senior. (3 marks)
(b) You are also responsible for the audit of Coot Co, and you are currently reviewing the working papers of the audit for the year ended 28 February 2012. In the working papers dealing with payroll, the audit junior has commented as follows:
‘Several new employees have been added to the company’s payroll during the year, with combined payments of $125,000 being made to them. There does not appear to be any authorisation for these additions. When I questioned the payroll supervisor who made the amendments, she said that no authorisation was needed because the new employees are only working for the company on a temporary basis. However, when discussing staffing levels with management, it was stated that no new employees have been taken on this year. Other than the tests of controls planned, no other audit work has been performed.’
Required:
In relation to the audit of Coot Co’s payroll:
Explain the meaning of the term ‘professional skepticism’, and recommend any further actions that should be taken by the auditor. (6 marks)
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)
A.neither of……asked
B.neither of……asked for
C.either of……asked
D.either of……asked for
He asked no one's permission; he did it ______ his own account.
A.for
B.with
C.on
D.from
He asked us to assist him ______ carrying through their plan.
A.in
B.on
C.to
D.of
When he arrived at the hospital, he asked worriedly who was (operate) ______ on.
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