(d) Briefly describe the principal audit work to be performed in respect of the carrying amount of the followingitems in the balance sheet:(i) trade receivables; and (3 marks)

题目

(d) Briefly describe the principal audit work to be performed in respect of the carrying amount of the following

items in the balance sheet:

(i) trade receivables; and (3 marks)

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更多“(d) Briefly describe the principal audit work to be performed in respect of the carrying amount of the followingitems in the balance sheet:(i) trade receivables; and (3 marks)”相关问题

  • 第1题：

    (b) Prepare a consolidated balance sheet as at 31 October 2005 for the Lateral Group in accordance with

    International Financial Reporting Standards. (21 marks)


    正确答案：

  • 第2题：

    (b) Prepare the balance sheet of York at 31 October 2006, using International Financial Reporting Standards,

    discussing the nature of the accounting treatments selected, the adjustments made and the values placed

    on the items in the balance sheet. (20 marks)


    正确答案：

    Gow’s net assets
    IAS36 ‘Impairment of Assets’, sets out the events that might indicate that an asset is impaired. These circumstances include
    external events such as the decline in the market value of an asset and internal events such as a reduction in the cash flows
    to be generated from an asset or cash generating unit. The loss of the only customer of a cash generating unit (power station)
    would be an indication of the possible impairment of the cash generating unit. Therefore, the power station will have to be
    impairment tested.
    The recoverable amount will have to be determined and compared to the value given to the asset on the setting up of the
    joint venture. The recoverable amount is the higher of the cash generating unit’s fair value less costs to sell, and its value-inuse.
    The fair value less costs to sell will be $15 million which is the offer for the purchase of the power station ($16 million)
    less the costs to sell ($1 million). The value-in-use is the discounted value of the future cash flows expected to arise from the
    cash generating unit. The future dismantling costs should be provided for as it has been agreed with the government that it
    will be dismantled. The cost should be included in the future cash flows for the purpose of calculating value-in-use and
    provided for in the financial statements and the cost added to the property, plant and equipment ($4 million ($5m/1·064)).
    The value-in-use based on a discount rate of 6 per cent is $21 million (working). Therefore, the recoverable amount is
    $21 million which is higher than the carrying value of the cash generating unit ($20 million) and, therefore, the value of the
    cash generating unit is not impaired when compared to the present carrying value of $20 million (value before impairment
    test).
    Additionally IAS39, ‘Financial Instruments: recognition and measurement’, says that an entity must assess at each balance
    sheet date whether a financial asset is impaired. In this case the receivable of $7 million is likely to be impaired as Race is
    going into administration. The present value of the estimated future cash flows will be calculated. Normally cash receipts from
    trade receivables will not be discounted but because the amounts are not likely to be received for a year then the anticipated
    cash payment is 80% of ($5 million × 1/1·06), i.e. $3·8 million. Thus a provision for the impairment of the trade receivables
    of $3·2 million should be made. The intangible asset of $3 million would be valueless as the contract has been terminated.
    Glass’s Net Assets
    The leased property continues to be accounted for as property, plant and equipment and the carrying amount will not be
    adjusted. However, the remaining useful life of the property will be revised to reflect the shorter term. Thus the property will
    be depreciated at $2 million per annum over the next two years. The change to the depreciation period is applied prospectively
    not retrospectively. The lease liability must be assessed under IAS39 in order to determine whether it constitutes a
    de-recognition of a financial liability. As the change is a modification of the lease and not an extinguishment, the lease liability
    would not be derecognised. The lease liability will be adjusted for the one off payment of $1 million and re-measured to the
    present value of the revised future cash flows. That is $0·6 million/1·07 + $0·6 million/(1·07 × 1·07) i.e. $1·1 million. The
    adjustment to the lease liability would normally be recognised in profit or loss but in this case it will affect the net capital
    contributed by Glass.
    The termination cost of the contract cannot be treated as an intangible asset. It is similar to redundancy costs paid to terminate
    a contract of employment. It represents compensation for the loss of future income for the agency. Therefore it must be
    removed from the balance sheet of York. The recognition criteria for an intangible asset require that there should be probable
    future economic benefits flowing to York and the cost can be measured reliably. The latter criterion is met but the first criterion
    is not. The cost of gaining future customers is not linked to this compensation.
    IAS18 ‘Revenue’ contains a concept of a ‘multiple element’ arrangement. This is a contract which contains two or more
    elements which are in substance separate and are separately identifiable. In other words, the two elements can operate
    independently from each other. In this case, the contract with the overseas company has two distinct elements. There is a
    contract not to supply gas to any other customer in the country and there is a contract to sell gas at fair value to the overseas
    company. The contract has not been fulfilled as yet and therefore the payment of $1·5 million should not be taken to profit
    or loss in its entirety at the first opportunity. The non supply of gas to customers in that country occurs over the four year
    period of the contract and therefore the payment should be recognised over that period. Therefore the amount should be
    shown as deferred income and not as a deduction from intangible assets. The revenue on the sale of gas will be recognised
    as normal according to IAS18.
    There may be an issue over the value of the net assets being contributed. The net assets contributed by Glass amount to
    $21·9 million whereas those contributed by Gow only total $13·8 million after taking into account any adjustments required
    by IFRS. The joint venturers have equal shareholding in York but no formal written agreements, thus problems may arise ifGlass feels that the contributions to the joint venture are unequal.

  • 第3题：

    (b) Describe the audit work to be performed in respect of the carrying amount of the following items in the

    balance sheet of GVF as at 30 September 2005:

    (i) goat herd; (4 marks)


    正确答案：
    (b) Audit work on carrying amounts
    Tutorial note: This part concerns audit work to be undertaken in respect of non-current tangible assets (the production
    animals in the goat herd and certain equipment) and inventories (the for-sale animals and cheese). One of the ‘tests’ for
    assessing whether or not a point is worthy of a mark will be whether or not the asset to which it relates is apparent. Points
    which are so vague that they could apply to ANY non-current asset for ANY entity, rather than those of GVF are unlikely to
    attract many marks, if any, at this level.
    (i) Goat herd
    ■ Physical inspection of the number and condition of animals in the herd and confirming, on a test basis, that they
    are tagged (or otherwise ‘branded’ as being owned by GVF).
    ■ Tests of controls on management’s system of identifying and distinguishing held-for-sale animals (inventory) from
    the production herd (depreciable non-current assets).
    ■ Comparison of GVF’s depreciation policies (including useful lives, depreciation methods and residual values) with
    those used by other farming entities.
    ■ ‘Proof in total’, or other reasonableness check, of the depreciation charge for the herd for the year.
    ■ Observing test counts or total counts of animals held for sale.
    ■ Comparing carrying amounts of the kids, according to their weight and age, as at 30 September 2005 with their
    market values. (These may approximate to actual invoiced selling prices obtained by GVF.)
    Tutorial note: Market value of the production herd could also be compared with its carrying amount to assess possible
    impairment. However, if value in use appears to be less than market value the herd should be sold rather than used
    for production.

  • 第4题：

    (b) Describe the principal matters that should be included in your firm’s submission to provide internal audit

    services to RBG. (10 marks)


    正确答案：
    (b) Principal matters to be included in submission to provide internal audit services
    ■ Introduction/background – details about York including its organisation (of functions), offices (locations) and number of
    internal auditors working within each office. The office that would be responsible for managing the contract should be
    stated.
    ■ A description of York’s services most relevant to RBG’s needs (e.g. in the areas of risk management, IT audits, value for
    money (VFM) and corporate governance).
    ■ Client-specific issues identified. For example, revenue audits will be required routinely for control purposes and to
    substantiate the contingent rents due. Other areas of expertise that RBG may be interested in taking advantage of, for
    example, special projects such as acquisitions and mergers.
    ■ York’s approach to assessing audit needs including the key stages and who will be involved. For example:
    (1) Preliminary – review of business, industry and the entity’s operating characteristics
    (2) Planning – including needs analysis and co-ordination with external audit plan
    (3) Post-Audit – assurance that activities were effectively and efficiently executed
    (4) Review – of services provided, reports issued and management’s responses.
    ■ A description of internal audit tools used and methodologies/approach to audit fieldwork including use of embedded
    audit software and programs developed by York.
    ■ A description of York’s systems-based audit, the IT issues to be addressed and the technological support that can be
    provided.
    ■ Any training that will be offered to RBG’s managers and staff, for example, in a risk management approach.
    ■ A description and quantity of resources, in particular the number of full-time staff, to be deployed in providing services
    to RBG. An outline of RBG’s track record in human resource retention and development.
    ■ Relevant experience – e.g. in internal and external audit in the retail industry. The relative qualifications and skills of
    each grade of audit staff and the contract manager in particular.
    ■ Insurance certifications covering, for example, public liability and professional indemnity insurance.
    ■ Work ethic policies relating to health and safety, equal opportunities’ and race relations.
    ■ How York ensures quality throughout the internal audit process including standards to be followed (e.g. Institute of
    Internal Auditors’ standards).
    ■ Sample report templates – e.g. for reporting the results of risk analysis, audit plans and quarterly reporting of findings
    to the Audit and Risk Management Committee.
    ■ Current clients to whom internal audit services are provided from whom RBG will be able to take up references, by
    arrangement, if York is short-listed.
    ■ Any work currently carried out/competed for that could cause a conflict of interest (and the measures to avoid such
    conflicts).
    ■ Fees (daily rates) for each grade of staff and travel and other expenses to be reimbursed. An indication of price increases,
    if any, over the three-year contract period. Invoicing terms (e.g. on presentation of reports) and payment terms (e.g. the
    end of the month following receipt of the invoice).
    ■ Performance targets to be met such as deadlines for completing work and submitting and issuing reports.

  • 第5题：

    (c) You have been making preliminary inquiries regarding matters arising from the previous year’s audit of Di Rollo.

    It has been revealed that no action has been taken in response to the management letter prepared by the previous

    auditors. Di Rollo’s management has explained that this was because it was ‘poorly prepared’ and ‘unhelpful’.

    Required:

    Briefly describe various criteria against which the effectiveness of a management letter may be assessed.

    (7 marks)


    正确答案：
    (c) Management letter effectiveness criteria
    Tutorial note: Candidates at this level must know that a management letter is a letter of weakness (also called post-audit
    letter). NO marks will be awarded for consideration of any other letters (e.g. management representation letters, engagement
    letters).
    ■ Timeliness – a management letter should be issued as soon as possible after completion of the audit procedures giving
    rise to comment. This is particularly important when audit work is carried out on more than one audit visit and where
    it is a matter of urgency that management make improvements to their procedures (e.g. where there is evidence of
    serious weakness).
    ■ Clarity – wording must be clear so that recipients understand the significance of weaknesses that are being drawn to
    their attention. It is particularly important that implications are explained clearly in terms that will prompt management
    to respond positively (e.g. drawing attention to the risks of financial loss arising).
    ■ Illustrative – specific illustrative examples (e.g. of where controls have not been evidenced) should aid management in
    understanding the nature of the problem(s).
    ■ Constructive comments/advice – recommendations for improvements must be practicable (i.e. appropriate and costeffective
    in the light of the client’s resources) if the client is to take corrective action.
    ■ Conciseness – unnecessary volume will distract management from new/additional matters that require their attention.
    For example, matters adequately dealt with in the internal auditor’s report should not be repeated.
    ■ Factual accuracy is essential. Inaccuracies will not only aggravate the client and appear unprofessional but could, in rare
    circumstances, result in liability. Similarly, the letter should not criticise (or ‘cast aspersions’) on individual staff members
    if it is the system that is inadequate.
    ■ A suitable structure – for example ‘tiered’, where the report contains matters of varying levels of significance. By directing
    different classes of matters to the appropriate level or area of responsibility action by management can be taken more
    speedily and constructively.
    Tutorial note: An alternative structure might be one that sequences those recommendations that improve
    profitability/cash flows before those that deal with information systems.
    ■ Inclusion of staff responses – both to advise senior management of action proposed/being taken by their staff and to give
    credit to recommendations for improvements where it is due (e.g. where client’s staff have proposed recommendations).
    ■ Inclusion of management’s response – an indication of the actions that management intends to take is more likely to
    result in action being taken. Discussing findings with management first should also ensure their factual accuracy.
    ■ Client’s perspective – implications from the client’s viewpoint (e.g. in terms of cost savings) are more likely to be acted
    on than those expressed from an audit perspective (e.g. in terms of lowered audit risk).
    ■ Professional tone – should not be offensive. Comments that fault management’s knowledge, competence, motives or
    integrity are likely to provoke defensive reactions. Comments should be positive/constructive by emphasising
    solutions/benefits.
    Tutorial notes: Other points that candidates may include:
    ■ Inclusion of matters of future relevance
    ■ Cost effectiveness – minutes of discussions with management instead of a formal weakness letter
    ■ Not raising ‘people problems’ in such a formal communication (a confidential discussion is preferable).

  • 第6题：

    (c) Describe the audit procedures you should perform. to determine the validity of the amortisation rate of five

    years being applied to development costs in relation to Plummet. (5 marks)


    正确答案：
    (c) Audit procedures to determine the validity of the amortisation rate of five years being applied to development costs in relation
    to the product Plummet would include the following:
    – Obtain the papers documenting market research carried out on Plummet. Review and ascertain that the market research
    supports a product life span of five years.
    – Review actual sales patterns since the launch of Plummet and compare to the predicted sales per the market research
    document.
    Tutorial note: this will help to demonstrate the accuracy of the predicted sales forecast of Plummet.
    – Read the assumptions underpinning the market research sales projections, and consider whether these assumptions
    agree with the auditors’ understanding of the business.
    – Discuss sales trends with the sales/marketing directors and ascertain whether sales are in line with management’s
    expectations.
    – Read correspondence with retail outlets to ensure there is continued support for selling Plummet.
    – Obtain marketing/advertising budgets and ascertain enough expenditure is continuing on Plummet to support continued
    sales.

  • 第7题：

    (b) Describe the principal audit procedures to be carried out in respect of the following:

    (i) The measurement of the share-based payment expense; (6 marks)


    正确答案：
    (b) (i) Principal audit procedures – measurement of share-based payment expense
    – Obtain management calculation of the expense and agree the following from the calculation to the contractual
    terms of the scheme:
    – Number of employees and executives granted options
    – Number of options granted per employee
    – The official grant date of the share options
    – Vesting period for the scheme
    – Required performance conditions attached to the options.
    – Recalculate the expense and check that the fair value has been correctly spread over the stated vesting period.
    – Agree fair value of share options to specialist’s report and calculation, and evaluate whether the specialist report is
    a reliable source of evidence.
    – Agree that the fair value calculated is at the grant date.
    Tutorial note: A specialist such as a chartered financial analyst would commonly be used to calculate the fair value
    of non-traded share options at the grant date, using models such as the Black-Scholes Model.
    – Obtain and review a forecast of staffing levels or employee turnover rates for the duration of the vesting period, and
    scrutinise the assumptions used to predict level of staff turnover.
    – Discuss previous levels of staff turnover with a representative of the human resources department and query why
    0% staff turnover has been predicted for the next three years.
    – Check the sensitivity of the calculations to a change in the assumptions used in the valuation, focusing on the
    assumption of 0% staff turnover.
    – Obtain written representation from management confirming that the assumptions used in measuring the expense
    are reasonable.
    Tutorial note: A high degree of scepticism must be used by the auditor when conducting the final three procedures
    due to the management assumption of 0% staff turnover during the vesting period.

  • 第8题：

    (ii) State the principal audit procedures to be performed on the consolidation schedule of the Rosie Group.

    (4 marks)


    正确答案：
    (ii) Audit procedures on the consolidation schedule of the Rosie Group:
    – Agree correct extraction of individual company figures by reference to individual company audited financial
    statements.
    – Cast and cross cast all consolidation schedules.
    – Recalculate all consolidation adjustments, including goodwill, elimination of pre acquisition reserves, cancellation
    of intercompany balances, fair value adjustments and accounting policy adjustments.
    – By reference to prior year audited consolidated accounts, agree accounting policies have been consistently applied.
    – Agree brought down figures to prior year audited consolidated accounts and audit working papers (e.g. goodwill
    figures for Timber Co and Ben Co, consolidated reserves).
    – Agree that any post acquisition profits consolidated for Dylan Co arose since the date of acquisition by reference to
    date of control passing per the purchase agreement.
    – Reconcile opening and closing group reserves and agree reconciling items to group financial statements.

  • 第9题：

    5 You are the manager responsible for the audit of Blod Co, a listed company, for the year ended 31 March 2008. Your

    firm was appointed as auditors of Blod Co in September 2007. The audit work has been completed, and you are

    reviewing the working papers in order to draft a report to those charged with governance. The statement of financial

    position (balance sheet) shows total assets of $78 million (2007 – $66 million). The main business activity of Blod

    Co is the manufacture of farm machinery.

    During the audit of property, plant and equipment it was discovered that controls over capital expenditure transactions

    had deteriorated during the year. Authorisation had not been gained for the purchase of office equipment with a cost

    of $225,000. No material errors in the financial statements were revealed by audit procedures performed on property,

    plant and equipment.

    An internally generated brand name has been included in the statement of financial position (balance sheet) at a fair

    value of $10 million. Audit working papers show that the matter was discussed with the financial controller, who

    stated that the $10 million represents the present value of future cash flows estimated to be generated by the brand

    name. The member of the audit team who completed the work programme on intangible assets has noted that this

    treatment appears to be in breach of IAS 38 Intangible Assets, and that the management refuses to derecognise the

    asset.

    Problems were experienced in the audit of inventories. Due to an oversight by the internal auditors of Blod Co, the

    external audit team did not receive a copy of inventory counting procedures prior to attending the count. This caused

    a delay at the beginning of the inventory count, when the audit team had to quickly familiarise themselves with the

    procedures. In addition, on the final audit, when the audit senior requested documentation to support the final

    inventory valuation, it took two weeks for the information to be received because the accountant who had prepared

    the schedules had mislaid them.

    Required:

    (a) (i) Identify the main purpose of including ‘findings from the audit’ (management letter points) in a report

    to those charged with governance. (2 marks)


    正确答案：
    5 Blod Co
    (a) (i) A report to those charged with governance is produced to communicate matters relating to the external audit to those
    who are ultimately responsible for the financial statements. ISA 260 Communication of Audit Matters With Those
    Charged With Governance requires the auditor to communicate many matters, including independence and other ethical
    issues, the audit approach and scope, the details of management representations, and the findings of the audit. The
    findings of the audit are commonly referred to as management letter points. By communicating these matters, the auditor
    is confident that there is written documentation outlining all significant matters raised during the audit process, and that
    such matters have been formally notified to the highest level of management of the client. For the management, the
    report should ensure that they fully understand the scope and results of the audit service which has been provided, and
    is likely to provide constructive comments to help them to fulfil their duties in relation to the financial statements and
    accounting systems and controls more effectively. The report should also include, where relevant, any actions that
    management has indicated they will take in relation to recommendations made by the auditors.

  • 第10题：

    The income statement is prepared from ().

    A.the income statement columns of the work sheet

    B.the adjusted trial balance

    C.either the adjusted trial balance or the income statement columns of the work sheet

    D.both the adjusted trial balance and the income statement columns of the work sheet


    正确答案：C

  • 第11题：

    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.


    正确答案：

    Audit reports

    Palm Industries Co (Palm)

    (i) A customer of Palm’s owing $350,000 at the year end has not made any post year-end payments as they are disputing the quality of goods received. No allowance for receivables has been made against this balance. As the balance is being disputed, there is a risk of incorrect valuation as some or all of the receivable balance is overstated, as it may not be paid.

    This $350,000 receivables balance represents 1·2% (0·35/28·2m) of revenue, 6·3% (0·35/5·6m) of receivables and 7·3% (0·35/4·8m) of profit before tax; hence this is a material issue.

    (ii) A procedure to adopt includes:

    – Review whether any payments have subsequently been made by this customer since the audit fieldwork was completed.

    – Discuss with management whether the issue of quality of goods sold to the customer has been resolved, or whether it is still in dispute.

    – Review the latest customer correspondence with regards to an assessment of the likelihood of the customer making payment.

    (iii) If management refuses to provide against this receivable, the audit report will need to be modified. As receivables are overstated and the error is material but not pervasive a qualified opinion would be necessary.

    A basis for qualified opinion paragraph would be needed and would include an explanation of the material misstatement in relation to the valuation of receivables and the effect on the financial statements. The opinion paragraph would be qualified ‘except for’.

    Ash Trading Co (Ash)

    (i) Chestnut & Co was only appointed as auditors subsequent to Ash’s year end and hence did not attend the year-end inventory count. Therefore, they have not been able to gather sufficient and appropriate audit evidence with regards to the completeness and existence of inventory.

    Inventory is a material amount as it represents 21·3% (0·51/2·4m) of profit before tax and 5% (0·51/10·1m) of revenue; hence this is a material issue.

    (ii) A procedure to adopt includes:

    – Review the internal audit reports of the inventory count to identify the level of adjustments to the records to assess the reasonableness of relying on the inventory records.

    – Undertake a sample check of inventory in the warehouse and compare to the inventory records and then from inventory records to the warehouse, to assess the reasonableness of the inventory records maintained by Ash.

    (iii) The auditors will need to modify the audit report as they are unable to obtain sufficient appropriate evidence in relation to inventory which is a material but not pervasive balance. Therefore a qualified opinion will be required.

    A basis for qualified opinion paragraph will be required to explain the limitation in relation to the lack of evidence over inventory. The opinion paragraph will be qualified ‘except for’.

  • 第12题：

    Write an essay of 160-200 words based on the following picture.In your essay,you should（1）describe the picture briefly（2）interpret the meaning,and（3）give your comments You should write neatly on the ANSWER SHEET.（20 points）


    答案：
    解析：
    In the picture above,a man is talking on his phone loudly in a public place,being deliberately ignorant of other people's aversion to him within the same enclosed area.This illustration tries to point out the public cell phone behavior Public places,such as libraries,hospitals,galleries and theaters,are usually expected to be quiet and peaceful ne uses of mobile phones in such places are likely to disrupt the desirable working environment For instance.in a library,where people are pondering over the books,the constant mobile ringtones or the phone conversation will be intru-sive or irritating.Mobile phone usage in public places like hospitals can easily interfere with the medical equipment which can be harmful to the patient.Moreover,the environment at shopping malls,stores and other public places is very noisy and talking over cell phones will add extra decibel.Apart from that,using mobile phones in music galleries or theaters can result in others'discomfort and spoil their entertainment In my opinion,cell phones should be allowed in public places with some restrictions.What's more,in public places,quiet zones where phone use is banned should be set up.

  • 第13题：

    (ii) Describe the basis for the calculation of the provision for deferred taxation on first time adoption of IFRS

    including the provision in the opening IFRS balance sheet. (4 marks)


    正确答案：
    (ii) A company has to apply IAS12 to the temporary differences between the carrying amount of the assets and liabilities in
    its opening IFRS balance sheet (1 November 2003) and their tax bases (IFRS1 ‘First time adoption of IFRS’). The
    deferred tax provision will be calculated using tax rates that have been enacted or substantially enacted by the balance
    sheet date. The carrying values of the assets and liabilities at the opening balance sheet date will be determined by
    reference to IFRS1 and will use the applicable IFRS in the first IFRS financial statements. Any adjustments required to
    the deferred tax balance will be recognised directly in retained earnings.
    Subsequent balance sheets (at 31 October 2004 and 31 October 2005) will be drawn up using the IFRS used in the
    financial statements to 31 October 2005. The deferred tax provision will be adjusted as at 31 October 2004 and thenas at 31 October 2005 to reflect the temporary differences arising at those dates.

  • 第14题：

    (b) Describe the principal audit work to be performed in respect of the useful lives of Shire Oil Co’s rig platforms.

    (6 marks)


    正确答案：
    (b) Principal audit work – useful life of rig platforms
    Tutorial notes: The platforms are just one item of each rig. Candidates should not be awarded marks here for the matters
    to be considered in the assessment of useful lives (since this is illustrated in the scenario). No marks will be awarded for
    criticising management for estimating useful lives on a per platform. basis or for audit work on depreciation charges/carrying
    amounts unrelated to the determination of useful lives.
    ■ Review of management’s annual assessment of the useful life of each rig at 31 December 2005 and corroboration of
    any information that has led to a change in previous estimates. For example, for the abandoned rig, where useful life
    has been assessed to be at an end, obtain:
    ? weather reports;
    ? incident report supported by photographs;
    ? insurance claim, etc.
    ■ Consider management’s past experience and expertise in estimating useful lives. For example, if all lives initially
    assessed as short (c. 15 years) are subsequently lengthened (or long lives consistently shortened) this would suggest
    that management is being over (under) prudent in its initial estimates.
    ■ Review of industry comparatives as published in the annual reports of other oil producers.
    ■ Comparison of actual maintenance costs against budgeted to confirm that the investment needed in maintenance, to
    achieve expected life expectancy, is being made.
    ■ Comparison of actual output (oil extracted) against budgeted. If actual output is less than budgeted the economic life
    of the platform. may be:
    ? shorter (e.g. because there is less oil to be extracted than originally surveyed); or
    ? longer (e.g. because the rate of extraction is less than budgeted).
    Tutorial note: An increase in actual output can be explained conversely.
    ■ A review of the results of management’s impairment testing of each rig (i.e. the cash-generating unit of which each
    platform. is a part).
    ■ Recalculations of cash flow projections (based on reasonable and supportable assumptions) discounted at a suitable
    pre-tax rate.
    Tutorial note: As the rigs will not have readily determinable net selling prices (each one being unique and not available
    for sale) any impairment will be assessed by a comparison of value in use against carrying amount.
    ■ Review of working papers of geologist/quantity surveyor(s) employed by Shire supporting estimations of reserves used
    in the determination of useful lives of rigs.

  • 第15题：

    (c) Briefly describe the principal audit work to be performed in respect of the carrying amount of the following

    items in the balance sheet:

    (i) development expenditure on the Fox model; (3 marks)


    正确答案：
    (c) Principal audit work
    (i) Development expenditure on the Fox model
    ■ Agree opening balance, $6·3 million, to prior year working papers.
    ■ Physically inspect assembly plant/factory where the Fox is being developed and any vehicles so far manufactured
    (e.g. for testing).
    ■ Substantiate costs incurred during the year, for example:
    – goods (e.g. components) and services (e.g. consultants) to purchase invoices;
    – labour (e.g. design engineers/technicians, mechanics, test drivers) to the payroll analysis;
    – overheads (e.g. depreciation of development buildings and equipment, power, consumables) to
    management’s calculation of overhead absorption and underlying cost accounts.
    ■ Review of internal trials/test drive results (e.g. in reports to management and video recordings of events).
    ■ Reperform. management’s impairment test of development expenditure. In particular recalculate value in use.
    Tutorial note: It is highly unlikely that a reasonable estimate of fair value less costs to sell could be made for so
    unique an asset.
    ■ Substantiate the key assumptions made by management in calculating value in use. For example:
    – the level of sales expected when the car is launched to advance orders (this may have fallen with the delay
    in the launch);
    – the discount rate used to Pavia’s cost of capital;
    – projected growth in sales to actual sales growth seen last time a new model was launched.

  • 第16题：

    (ii) Briefly explain the implications of Parr & Co’s audit opinion for your audit opinion on the consolidated

    financial statements of Cleeves Co for the year ended 30 September 2006. (3 marks)


    正确答案：
    (ii) Implications for audit opinion on consolidated financial statements of Cleeves
    ■ If the potential adjustments to non-current asset carrying amounts and loss are not material to the consolidated
    financial statements there will be no implication. However, as Howard is material to Cleeves and the modification
    appears to be ‘so material’ (giving rise to adverse opinion) this seems unlikely.
    Tutorial note: The question clearly states that Howard is material to Cleeves, thus there is no call for speculation
    on this.
    ■ As Howard is wholly-owned the management of Cleeves must be able to request that Howard’s financial statements
    are adjusted to reflect the impairment of the assets. The auditor’s report on Cleeves will then be unmodified
    (assuming that any impairment of the investment in Howard is properly accounted for in the separate financial
    statements of Cleeves).
    ■ If the impairment losses are not recognised in Howard’s financial statements they can nevertheless be adjusted on
    consolidation of Cleeves and its subsidiaries (by writing down assets to recoverable amounts). The audit opinion
    on Cleeves should then be unmodified in this respect.
    ■ If there is no adjustment of Howard’s asset values (either in Howard’s financial statements or on consolidation) it
    is most likely that the audit opinion on Cleeves’s consolidated financial statements would be ‘except for’. (It should
    not be adverse as it is doubtful whether even the opinion on Howard’s financial statements should be adverse.)
    Tutorial note: There is currently no requirement in ISA 600 to disclose that components have been audited by another
    auditor unless the principal auditor is permitted to base their opinion solely upon the report of another auditor.

  • 第17题：

    (b) Explain the principal audit procedures to be performed during the final audit in respect of the estimated

    warranty provision in the balance sheet of Island Co as at 30 November 2007. (5 marks)


    正确答案：
    (b) ISA 540 Audit of Accounting Estimates requires that auditors should obtain sufficient audit evidence as to whether an
    accounting estimate, such as a warranty provision, is reasonable given the entity’s circumstances, and that disclosure is
    appropriate. One, or a combination of the following approaches should be used:
    Review and test the process used by management to develop the estimate
    – Review contracts or orders for the terms of the warranty to gain an understanding of the obligation of Island Co
    – Review correspondence with customers during the year to gain an understanding of claims already in progress at the
    year end
    – Perform. analytical procedures to compare the level of warranty provision year on year, and compare actual to budgeted
    provisions. If possible disaggregate the data, for example, compare provision for specific types of machinery or customer
    by customer
    – Re-calculate the warranty provision
    – Agree the percentage applied in the calculation to the stated accounting policy of Island Co
    – Review board minutes for discussion of on-going warranty claims, and for approval of the amount provided
    – Use management accounts to ascertain normal level of warranty rectification costs during the year
    – Discuss with Kate Shannon the assumptions she used to determine the percentage used in her calculations
    – Consider whether assumptions used are consistent with the auditors’ understanding of the business
    – Compare prior year provision with actual expenditure on warranty claims in the accounting period
    – Compare the current year provision with prior year and discuss any fluctuation with Kate Shannon.
    Review subsequent events which confirm the estimate made
    – Review any work carried out post year end on specific faults that have been provided for. Agree that all costs are included
    in the year end provision.
    – Agree cash expended on rectification work in the post balance sheet period to the cash book
    – Agree cash expended on rectification work post year end to suppliers’ invoices, or to internal cost ledgers if work carried
    out by employees of Island Co
    – Read customer correspondence received post year end for any claims received since the year end.

  • 第18题：

    (b) Describe the potential benefits for Hugh Co in choosing to have a financial statement audit. (4 marks)


    正确答案：
    (b) There are several benefits for Hugh Co in choosing a voluntary financial statement audit.
    An annual audit will ensure that any material mistakes made by the part-qualified accountant in preparing the year end
    financial statements will be detected. This is important as the directors will be using the year end accounts to review their
    progress in the first year of trading and will need reliable figures to assess performance. An audit will give the directors comfort
    that the financial statements are a sound basis for making business decisions.
    Accurate first year figures will also enable more effective budgeting and forecasting, which will be crucial if rapid growth is to
    be achieved.
    The auditors are likely to use the quarterly management accounts as part of normal audit procedures. The auditors will be
    able to advise Monty Parkes of any improvements that could be made to the management accounts, for example, increased
    level of detail, more frequent reporting. Better quality management accounts will help the day-to-day running of the business
    and enable a speedier response to any problems arising during the year.
    As a by-product of the audit, a management letter (report to those charged with governance) will be produced, identifying
    weaknesses and making recommendations on areas such as systems and controls which will improve the smooth running of
    the business.
    It is likely that Hugh Co will require more bank funding in order to expand, and it is likely that the bank would like to see
    audited figures for review, before deciding on further finance. It will be easier and potentially cheaper to raise finance from
    other providers with an audited set of financial statements.
    As the business deals in cash sales, and retails small, luxury items there is a high risk of theft of assets. The external audit
    can act as both a deterrent and a detective control, thus reducing the risk of fraud and resultant detrimental impact on the
    financial statements.
    Accurate financial statements will be the best basis for tax assessment and tax planning. An audit opinion will enhance the
    credibility of the figures.
    If the business grows rapidly, then it is likely that at some point in the future, the audit exemption limit will be exceeded and
    thus an audit will become mandatory.
    Choosing to have an audit from the first year of incorporation will reduce potential errors carried down to subsequent periods
    and thus avoid qualifications of opening balances.

  • 第19题：

    (ii) Identify and explain the principal audit procedures to be performed on the valuation of the investment

    properties. (6 marks)


    正确答案：
    (ii) Additional audit procedures
    Audit procedures should focus on the appraisal of the work of the expert valuer. Procedures could include the following:
    – Inspection of the written instructions provided by Poppy Co to the valuer, which should include matters such as
    the objective and scope of the valuer’s work, the extent of the valuer’s access to relevant records and files, and
    clarification of the intended use by the auditor of their work.
    – Evaluation, using the valuation report, that any assumptions used by the valuer are in line with the auditor’s
    knowledge and understanding of Poppy Co. Any documentation supporting assumptions used by the valuer should
    be reviewed for consistency with the auditor’s business understanding, and also for consistency with any other
    audit evidence.
    – Assessment of the methodology used to arrive at the fair value and confirmation that the method is consistent with
    that required by IAS 40.
    – The auditor should confirm, using the valuation report, that a consistent method has been used to value each
    property.
    – It should also be confirmed that the date of the valuation report is reasonably close to the year end of Poppy Co.
    – Physical inspection of the investment properties to determine the physical condition of the properties supports the
    valuation.
    – Inspect the purchase documentation of each investment property to ascertain the cost of each building. As the
    properties were acquired during this accounting period, it would be reasonable to expect that the fair value at the
    year end is not substantially different to the purchase price. Any significant increase or decrease in value should
    alert the auditor to possible misstatement, and lead to further audit procedures.
    – Review of forecasts of rental income from the properties – supporting evidence of the valuation.
    – Subsequent events should be monitored for any additional evidence provided on the valuation of the properties.
    For example, the sale of an investment property shortly after the year end may provide additional evidence relating
    to the fair value measurement.
    – Obtain a management representation regarding the reasonableness of any significant assumptions, where relevant,
    to fair value measurements or disclosures.

  • 第20题：

    You are an audit manager responsible for providing hot reviews on selected audit clients within your firm of Chartered

    Certified 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 total

    assets of $12 million (2007 – $11·5 million).The audit senior has made the following comment in a summary of

    issues for your review:

    ‘Pulp Co’s statement of financial position (balance sheet) shows a receivable classified as a current asset with a value

    of $25,000. The only audit evidence we have requested and obtained is a management representation stating the

    following:

    (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 firm

    and 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 as

    at 31 January 2008:

    (i) Comment on the matters you should consider. (5 marks)


    正确答案：
    (b) (i) Matters to consider
    Materiality
    The receivable represents only 0·2% (25,000/12 million x 100) of total assets so is immaterial in monetary terms.
    However, the details of the transaction could make it material by nature.
    The amount is outstanding from a company under the control of Pulp Co’s chairman. Readers of the financial statements
    would be interested to know the details of this transaction, which currently is not disclosed. Elements of the transaction
    could be subject to bias, specifically the repayment terms, which appear to be beyond normal commercial credit terms.
    Paul Sheffield may have used his influence over the two companies to ‘engineer’ the transaction. Disclosure is necessary
    due to the nature of the transaction, the monetary value is irrelevant.
    A further matter to consider is whether this is a one-off transaction, or indicative of further transactions between the two
    companies.
    Relevant accounting standard
    The definitions in IAS 24 must be carefully considered to establish whether this actually constitutes a related party
    transaction. The standard specifically states that two entities are not necessarily related parties just because they have
    a director or other member of key management in common. The audit senior states that Jarvis Co is controlled by Peter
    Sheffield, who is also the chairman of Pulp Co. It seems that Peter Sheffield is in a position of control/significant influence
    over the two companies (though this would have to be clarified through further audit procedures), and thus the two
    companies are likely to be perceived as related.
    IAS 24 requires full disclosure of the following in respect of related party transactions:
    – the nature of the related party relationship,
    – the amount of the transaction,
    – the amount of any balances outstanding including terms and conditions, details of security offered, and the nature
    of consideration to be provided in settlement,
    – any allowances for receivables and associated expense.
    There is currently a breach of IAS 24 as no disclosure has been made in the notes to the financial statements. If not
    amended, the audit opinion on the financial statements should be qualified with an ‘except for’ disagreement. In
    addition, if practicable, the auditor’s report should include the information that would have been included in the financial
    statements had the requirements of IAS 24 been adhered to.
    Valuation and classification of the receivable
    A receivable should only be recognised if it will give rise to future economic benefit, i.e. a future cash inflow. It appears
    that the receivable is long outstanding – if the amount is unlikely to be recovered then it should be written off as a bad
    debt and the associated expense recognised. It is possible that assets and profits are overstated.
    Although a representation has been received indicating that the amount will be paid to Pulp Co, the auditor should be
    sceptical of this claim given that the same representation was given last year, and the amount was not subsequently
    recovered. The $25,000 could be recoverable in the long term, in which case the receivable should be reclassified as
    a non-current asset. The amount advanced to Jarvis Co could effectively be an investment rather than a short term
    receivable. Correct classification on the statement of financial position (balance sheet) is crucial for the financial
    statements to properly show the liquidity position of the company at the year end.
    Tutorial note: Digressions into management imposing a limitation in scope by withholding evidence are irrelevant in this
    case, as the scenario states that the only evidence that the auditors have asked for is a management representation.
    There is no indication in the scenario that the auditors have asked for, and been refused any evidence.

  • 第21题：

    Part B

    Directions:

    In your essay, you should

    1) describe the drawing briefly,

    2) explain its intended meaning, and then

    3) give your comments.

    You should write neatly on ANSHWER SHEET 2. (20 points)


    正确答案：
    本题漫画中，一个大圈被分成若干格，每个格里都有一个人在上网。人们通过网络联系起来，形成一张如同蜘蛛网的错综复杂的关系网。再由题目《网络的“近”与“远”》，可以想到漫画含义涉及网络的两个方面，一方面，网络拉近了人们之间的距离，足不出户便可进行交流;但另一方面，由于人们越来越依赖网络，面对面交流的机会越来越少了。
    　　围绕这一主题，根据提纲要求，本文结构设计如下：
    　　根据提纲中的信息1) describe the drawing briefly 第一段对漫画进行简单描述;
    　　根据提纲中的信息2) explain its intended meaning 第二段揭示漫画的含义，从正反两方面论述，一方面，网络为人们提供了便利的条件，使人们的交流更加便捷和迅速;另一方面，人们的现实交流越来越少了，感情似乎也疏远了。
    　　根据提纲中的信息3) give your comments 第三段表明作者的看法，即网络使社会成员的联系更加紧密，但在一定程度上也疏远了人们之间的关系。
    　　SAMPLE
    　　The above picture gives a vivid description of a huge spider web which symbolizes Internet. There’s no doubt that Internet, an entirely new way of communication, is becoming so popular nowadays that it’s difficult to imagine modern life without it. It has revolutionized the way of people’s living and thinking, and has exerted a profound effect on our daily life.
    　　Definitely, the symbolic meaning of the picture subtly conveyed should be taken into deep consideration. First of all, with the Internet, it is convenient and fast for people to have access to a variety of information and what they need to do is just to press key buttons. What’s more, the great utility of the Internet allow people within a company, across a nation or even around the world to work together. Finally, we can do almost everything via Internet. Specifically, we can conduct E-business, advertise our products, book an air ticket, buy and sell stocks, even hunt a new job through clicking the mouse. Nevertheless, it is a two-edged sword as well and has its own negative effects. Some people tend to spend hours on Internet for the sake of relaxation and develop addictions. As a result, the public have an emotional distance sometimes and thus few face-to-face communications in reality due to Internet addiction without self-restriction.
    From what have been discussed above, it is clear that with a personal computer and modem, any individual can call up information about almost anything from almost anywhere and almost anytime on the web. All in all, Internet, an indispensable part in modern life, has the power to connect people and, yet, to some extent, alienate people in reality.

  • 第22题：

    On the balance sheet, the amount shown for the Allowance for Doubtful Accounts is equal to the ( )

    A. Uncollectible accounts expense for the year

    B. total of the accounts receivables written-off during the year

    C. total estimated uncollectible accounts as of the end of the year

    D. sum of all accounts that are past due.


    答案：B
    解析：题目翻译为：在资产负债表上，坏账准备的金额等于()
    A.本年度的坏账费用
    B.本年度应收账款冲销总额
    C.截至年底估计的坏账总额
    D.所有逾期账款的总和。
    坏帐准备在资产负债表里没有单独设立科目，是通过应收账款科目来体现的。坏账准备是应收账款的备抵账户，资产负债表中应收账款项目应根据所属各明细科目的期末借方余额合计数减去坏账准备后的金额填列。“坏账准备”科目，核算应收款项的坏账准备计提、转销等情况。企业当期计提的坏账准备应当计入资产减值损失。“坏账准备”科目的贷方登记当期计提的坏账准备金额，借方登记实际发生的坏账损失冲减的坏账准备金额，期末余额一般在贷方，反映企业已计提但尚未转销的坏账准备。坏账准备可按以下公式计算：当期应计提的坏账准备＝当期按应收款项计算应提坏账准备金-（或＋）“坏账准备”科目的借贷方（或借方）余额

  • 第23题：

    Directions:

    In your essay, you should

    1) describe the drawing briefly,

    2) explain its intended meaning, and then

    3) give your comments.

    You should write neatly on ANSHWER SHEET 2. (20 points)


    正确答案：

    本题漫画中，一个大圈被分成若干格，每个格里都有一个人在上网。人们通过网络联系起来，形成一张如同蜘蛛网的错综复杂的关系网。再由题目《网络的“近”与“远”》，可以想到漫画含义涉及网络的两个方面，一方面，网络拉近了人们之间的距离，足不出户便可进行交流;但另一方面，由于人们越来越依赖网络，面对面交流的机会越来越少了。
    　　围绕这一主题，根据提纲要求，本文结构设计如下：
    　　根据提纲中的信息1) describe the drawing briefly 第一段对漫画进行简单描述;
    　　根据提纲中的信息2) explain its intended meaning 第二段揭示漫画的含义，从正反两方面论述，一方面，网络为人们提供了便利的条件，使人们的交流更加便捷和迅速;另一方面，人们的现实交流越来越少了，感情似乎也疏远了。
    　　根据提纲中的信息3) give your comments 第三段表明作者的看法，即网络使社会成员的联系更加紧密，但在一定程度上也疏远了人们之间的关系。
    　　SAMPLE
    　　The above picture gives a vivid description of a huge spider web which symbolizes Internet. There’s no doubt that Internet, an entirely new way of communication, is becoming so popular nowadays that it’s difficult to imagine modern life without it. It has revolutionized the way of people’s living and thinking, and has exerted a profound effect on our daily life.
    　　Definitely, the symbolic meaning of the picture subtly conveyed should be taken into deep consideration. First of all, with the Internet, it is convenient and fast for people to have access to a variety of information and what they need to do is just to press key buttons. What’s more, the great utility of the Internet allow people within a company, across a nation or even around the world to work together. Finally, we can do almost everything via Internet. Specifically, we can conduct E-business, advertise our products, book an air ticket, buy and sell stocks, even hunt a new job through clicking the mouse. Nevertheless, it is a two-edged sword as well and has its own negative effects. Some people tend to spend hours on Internet for the sake of relaxation and develop addictions. As a result, the public have an emotional distance sometimes and thus few face-to-face communications in reality due to Internet addiction without self-restriction.
    From what have been discussed above, it is clear that with a personal computer and modem, any individual can call up information about almost anything from almost anywhere and almost anytime on the web. All in all, Internet, an indispensable part in modern life, has the power to connect people and, yet, to some extent, alienate people in reality.

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