(ii) Describe the claim of each of the four identified stakeholders. (4 marks)
第1题:
(d) Draft a letter for Tim Blake to send to WM’s investors to include the following:
(i) why you believe robust internal controls to be important; and
(ii) proposals on how internal systems might be improved in the light of the overestimation of mallerite at
WM.
Note: four professional marks are available within the marks allocated to requirement (d) for the structure,
content, style. and layout of the letter.
(16 marks)
You will be aware of the importance of accurate resource valuation to Worldwide Minerals (WM). Unfortunately, I have to
inform. you that the reserve of mallerite, one of our key minerals in a new area of exploration, was found to have been
overestimated after the purchase of a mine. It has been suggested that this information may have an effect on shareholder
value and so I thought it appropriate to write to inform. you of how the board intends to respond to the situation.
In particular, I would like to address two issues. It has been suggested that the overestimation arose because of issues with
the internal control systems at WM. I would firstly like to reassure you of the importance that your board places on sound
internal control systems and then I would like to highlight improvements to internal controls that we shall be implementing
to ensure that the problem should not recur.
(i) Importance of internal control
Internal control systems are essential in all public companies and Worldwide Minerals (WM) is no exception. If anything,
WM’s strategic position makes internal control even more important, operating as it does in many international situations
and dealing with minerals that must be guaranteed in terms of volume, grade and quality. Accordingly, your board
recognises that internal control underpins investor confidence. Investors have traditionally trusted WM’s management
because they have assumed it capable of managing its internal operations. This has, specifically, meant becoming aware
of and controlling known risks. Risks would not be known about and managed without adequate internal control
systems. Internal control, furthermore, helps to manage quality throughout the organisation and it provides
management with information on internal operations and compliance. These features are important in ensuring quality
at all stages in the WM value chain from the extraction of minerals to the delivery of product to our customers. Linked
to this is the importance of internal control in helping to expose and improve underperforming internal operations.
Finally, internal control systems are essential in providing information for internal and external reporting upon which, in
turn, investor confidence rests.
(ii) Proposals to improve internal systems at WM
As you may be aware, mineral estimation and measurement can be problematic, particularly in some regions. Indeed,
there are several factors that can lead to under or overestimation of reserves valuations as a result of geological survey
techniques and regional cultural/social factors. In the case of mallerite, however, the issues that have been brought to
the board’s attention are matters of internal control and it is to these that I would now like to turn.
In first instance, it is clear from the fact that the overestimate was made that we will need to audit geological reports at
an appropriate (and probably lower) level in the organisation in future.
Once a claim has been made about a given mineral resource level, especially one upon which investor returns might
depend, appropriate systems will be instituted to ask for and obtain evidence that such reserves have been correctly and
accurately quantified.
We will recognise that single and verbal source reports of reserve quantities may not necessarily be accurate. This was
one of the apparent causes of the overestimation of mallerite. A system of auditing actual reserves rather than relying
on verbal evidence will rectify this.
The purchase of any going concern business, such as the mallerite mine, is subject to due diligence. WM will be
examining its procedures in this area to ensure that they are fit for purpose in the way that they may not have been in
respect of the purchase of the mallerite mine. I will be taking all appropriate steps to ensure that all of these internal
control issues can be addressed in future.
Thank you for your continued support of Worldwide Minerals and I hope the foregoing goes some way to reassure you
that the company places the highest value on its investors and their loyalty.
Yours faithfully,
Tim Blake
Chairman
第2题:
(ii) Using the previous overhead allocation basis (as per note 4), calculate the budgeted profit/(loss)
attributable to each type of service for the year ending 31 December 2006 and comment on the results
obtained using the previous and revised methods of overhead allocation. (5 marks)
第3题:
(ii) Briefly discuss FOUR non-financial factors which might influence the above decision. (4 marks)
第4题:
(b) Using sensitivity analysis, estimate by what percentage each of the under-mentioned items, taken separately,
would need to change before the recommendation in (a) above is varied:
(i) Initial outlay;
(ii) Annual contribution. (4 marks)
第5题:
(b) The management of Division C has identified the need to achieve cost savings in order to become more
competitive. They have decided that an analysis and investigation of quality costs into four sub-categories will
provide a focus for performance measurement and improvement.
Required:
Identify the FOUR sub-categories into which quality costs can be analysed and provide examples (which
must relate to Division C) of each of the four sub-categories of quality cost that can be investigated in order
that overall cost savings might be achieved and hence the performance improved. (8 marks)
第6题:
(c) State any reliefs Bob could claim regarding the fall in value of his shares in Willis Ltd, and describe how the
operation of any such reliefs could reduce Bob’s taxable income. (4 marks)
Relevant retail price index figures are:
September 1990 129·3
April 1998 162·6
December 2004 189·9
第7题:
(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)
第8题:
(ii) equipment used in the manufacture of Bachas Blue; and (4 marks)
第9题:
(c) (i) Identify and describe FOUR quality control procedures that are applicable to the individual audit
engagement; and (8 marks)
第10题:
(ii) Describe the procedures to verify the number of serious accidents in the year ended 30 November 2007.
(4 marks)
第11题:
(b) Describe the potential benefits for Hugh Co in choosing to have a financial statement audit. (4 marks)
第12题:
(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 of
transactions. (4 marks)
(c) In terms of audit reports, explain the term ‘modified’. (2 marks)
第13题:
(b) Using the TARA framework, construct four possible strategies for managing the risk presented by Product 2.
Your answer should describe each strategy and explain how each might be applied in the case.
(10 marks)
第14题:
(b) Discuss FOUR factors that distinguish service from manufacturing organisations and explain how each of
these factors relates to the services provided by the Dental Health Partnership. (5 marks)
第15题:
(e) Briefly discuss FOUR initiatives that management might consider in order to further enhance profitability.
(4 marks)
第16题:
(ii) evaluates the relative performance of the four depots as indicated by the analysis in the summary table
prepared in (i); (5 marks)
第17题:
(ii) Comment on the figures in the statement prepared in (a)(i) above. (4 marks)
第18题:
(ii) Briefly outline the tax consequences for Henry if the types of protection identified in (i) were to be
provided for him by Happy Home Ltd compared to providing them for himself. You are not required to
discuss the corporation tax (CT) consequences for Happy Home Ltd. (4 marks)
第19题:
(ii) Audit work on after-date bank transactions identified a transfer of cash from Batik Co. The audit senior has
documented that the finance director explained that Batik commenced trading on 7 October 2005, after
being set up as a wholly-owned foreign subsidiary of Jinack. No other evidence has been obtained.
(4 marks)
Required:
Identify and comment on the implications of the above matters for the auditor’s report on the financial
statements of Jinack Co for the year ended 30 September 2005 and, where appropriate, the year ending
30 September 2006.
NOTE: The mark allocation is shown against each of the matters.
第20题:
4 (a) ISA 701 Modifications to The Independent Auditor’s Report includes ‘suggested wording of modifying phrases
for 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)
第21题:
(ii) Describe the evidence you would seek to support the assertion that development costs are technically
feasible. (3 marks)
第22题:
(ii) Deema Co. (4 marks)
第23题:
(ii) Recommend further audit procedures that should be carried out. (4 marks)