文稿說明分析f8parta

PartConceptof Golden 記/

Comprises8twomarkand4onemarkmultiplechoiceSectionFour10markquestions.Two20markTheexaminationisathreehourpaperwith15minutesreadingandplanningAllquestionsareSomequestionswilladoptascenario/casestudyapproach.Allthosequestionswillrequiresomeformofwrittenresponsealthoughquestionsonplanningorreviewmayrequirethecalculationandinterpretationofsomebasicratios2WhichTWOofthefollowingshouldbeincludedinanauditengagement①Objectiveandscopeofthe②Resultsofprevious③Management’s④Needtomaintainprofessional①and①and②and③and(2 Golden1WhichofthefollowingisNOTaresponsibilityoftheToprovideanopiniononthetruthandfairnessofthefinancialToconductanauditinaccordancewithInternationalStandardsonToexpressanopiniononthecompany’sgoingconcern(1IsthefollowingstatementtrueorAuditriskisafunctionoftwocomponents,inherentriskandcontrol(1DefinitionofSourceofTheauditorcanbeseenasanagentoftheshareholders.Underlaw,theyreporttoandareappointedbytheshareholdersExternalauditsprovideassurancetoshareholdersthatthefinancialstatementsareprepared,inallmaterialrespects,inaccordancewithanapplicablefinancialreportingTheultimateaimoftheauditprocessisfortheauditorstobeinapositiontoexpresstheiropiniontotheshareholdersastowhetherthefinancialstatementshavebeenprepared,inallmaterialrespects,inaccordancewiththeapplicablefinancialreportingframework.Inouropinion,thefinancialstatementspresentfairly,inallmaterialrespects,(orgiveatrueandfairviewof)thefinancialpositionofABCCompanyasat31December20X1,and(of)itsfinancialperformanceanditscashflowsfortheyearthenendedinaccordancewithInternationalFinancialReportingStandards.InformationismaterialifitsomissionormisstatementcouldinfluencetheeconomicdecisionsofuserstakenonthebasisofthefinancialstatementsBoththeamount(ty)andnature(quality)ofmisstatementsneedtobeconsidered.e.g.lackofdisclosureregardingongoinglitigationislikelytobeconsideredmaterial.Thecalculationofbetween5and10%ofprofitbeforeNoauditorcangive100%assurance(absoluteassurance).Thehighestlevelofassurancegiven,asinthecaseofstatutoryaudit,isdescribedas'reasonable'Reasonableassurance'isnotabsoluteassurancebecausethereareinherentlimitationsofanauditwhichresultintheauditorforminganopiniononevidencethatispersuasiveratherthanconclusive.Limitationsoftheaudit,Auditisnotobjective.Judgmenthastobemade.Notallitemsinthefinancialstatementare'Anassuranceengagementisanengagementinwhichapractitionerexpressesaconclusiondesignedtoenhancethedegreeofconfidenceoftheintendedusersotherthantheresponsiblepartyaboutthe eoftheevaluationormeasurementofasubjectmatteragainstcriteria.'OtherexamplesofassuranceengagementsAreviewoftheeffectivenessofanentity’sinternalcontrolorcomputerAreviewofanentity’shalfyearAnassurancereportprovidesthefollowingbenefitstotheusersofIndependentopinionfromanexternalsourcethatenhancesthecredibilityoftheTherelevanceoftheinformationmaybeimprovedbytheexpertiseandknowledgeoftheassurancefirm.Allassuranceengagements,whethersubjectedtolegalregulationsuchasstatutoryauditoracontractualarrangementshouldbeperformedinasimilarmanner:AgreethescopeofworktobeFormaliseallofthetermsoftheengagementinacontract(engagementPlantheObtainsufficientappropriateevidenceonwhichtobasethePerformoverallreviewandformIssuereporttotheLevelsofLevelofExternal–PositiveexpressionInouropinion,thefinancialstatementspresentfairly,inallmaterialrespects,inaccordancewithInternationalFinancialReportingStandards.Limited–NegativeBasedonourworkdescribedinthisreport,nothinghascourattentionthatcausesustobelievethatthefinancialstatementsdonotpresentfairly,inallmaterialrespects,inaccordancewithInternationalFinancialReportingTest1Theconceptofaudit&考試中20分選擇題部分IsthefollowingstatementregardingstewardshiptrueorDirectorsarestewardsoftheinvestmentmadebyshareholdersinaWhonormallyappointstheexternalauditorsofaAuditSeniorWhichofthefollowingisthemostappropriatedefinitionoftheexternalTheexternalauditisanexercisecarriedoutbyauditorsinordertogiveanopiniononwhetherthefinancialstatementsofacompanyaremateriallymisstated.Theexternalauditisanexercisecarriedoutinordertogiveanopinionontheeffectivenessofcompany'sinternalcontrolsystem.Theexternalauditisperformedbymanagementtoidentifyareasofdeficiencywithinacompanyandtomake mendationstomitigatethosedeficiencies.Theexternalauditprovidesnegativeassuranceonthetruthandfairnessofacompany'sfinancialstatements.Oneoftheprimarysourcesofinformationaboutacompanyisthefinancialstatements.Thedirectorsareresponsibleforpreparingthefinancialstatements.whichofthefollowingisoneexplanationoftheneedforanindependentauditofthesefinancialstatements?Thedirectorsmaylackthenecessaryskillsorknowledgetopreparefinancialstatementsthataretureandfair.Allcompaniesarerequiredbylawtohavetheirfinancialstatementsauditedbyanindependent,professionallyqualifiedaccountant.AnindependentauditwillensurethatthecorrecttaxispaidtothetaxThedirectorsoftendirectlybenefitfromreportinghigherprofitsdirector'sremunerationmayincludebonuseslinkedtothelevelofprofitsachieved.thiscreatesaofinterest.Inrelationtothemeaningof“trueandfair,isthefollowingstatementtrueorfalse?ThereisnodefinitionintheinternationalstandardsonAuditingoftrueandfair,butitisgenerallyconsideredtohavethefollowingmeaning:Factual,conformswithaccountingstanardsandrelevantlegislationandagreeswithUnderlyingrecords.Clear,impartialandreflectsthecommercialsubstanceofthetransactionsoftheInanstatutoryauditengagementtheauditpractitionershouldgathersufficientappropriateevidencetobeableto:DrawplausibleDrawreasonableDrawlimitedThelevelofassuranceprovidedbyanexternalauditisabsolute.Isthisstatementtrueorfalse?whichofthefollowingisthecorrectdefinitionofanassurance‘Anengagementinwhicharesponsiblepartyexpressesaconclusiondesignedtoenhancethedegreeofconfidenceofintendedusersaboutthe eoftheevaluationormeasurementofasubjectmatteragainstcriteria’ ‘Anengagementinwhichapractitionerexpressesaconclusiondesignedtoenhancethedegreeofconfidenceofintendedusersotherthantheresponsiblepartyabouttheeoftheevaluationormeasurementofasubjectmatteragainst ‘Anengagementinwhichapractitionerexpressesaconclusiondesignedtoenhancethedegreeofconfidenceofintendedusersotherthantheresponsiblepartyaboutasubjectmatter’WhichofthefollowingarepartiesinvolvedwithinanassuranceIntended1,2,2,3,3,4,1,3,WhichTwoofthefollowingareelementsofanassuranceAnappropriatesubjectAregisteredAwrittenassurancereportinanappropriateWhichtwoofthefollowingareelementsofanassuranceSuitableDeterminationofAnengagement(1)and(2)(1)and(3)(2)and(3)(1),(2)andWhichofthefollowingappropriayexplainsthedifferencebetweenalimitedassuranceengagementandreasonableassuranceengagement?Limitedassuranceisgivenwhenamaterialmisstatementhasbeenidentifiedinthesubjectmatterbutsomeassurancecanstillbegiven,whereasreasonableassuranceisgivenwhennomaterialmisstatementshavebeenidentified.Inalimitedassuranceengagement,thepractitionerwillgatherlimitedevidence.InareasonableassuranceengagementthepractitionerwillgathersufficientappropriateInareasonableassuranceengagement,thepractitionerisfullyliableifthefinancialstatementarelaterfoundtocontainamaterialmisstatement;inalimitedassuranceengagement,thepractitionerhaslimitedliabilityInalimitedassuranceengagementthepractitionerwillconcludewhetherthesubjectmatter,willrespecttoidentifiedsuitablecriteria,isplausibleinthecircumstances.Inareasonableassuranceengagementthepractitionerwillconcludewhetherthesubjectmatterconformsinallmaterialrespectswithidentifiedsuitablecriteria.IntermsofassuranceengagementsisthefollowingstatementtrueorAlimitedassuranceengagementprovidesuserswithalowlevelofconfidenceinrelationtothesubjectmatter?WhichofthefollowingstatementsrelatetoreviewSubjectmatterisNothinghascourattentionwhichwouldindicatethatthesubjectmattercontainsmaterialmisstatementsPositive1and2and2and1and2014/12WhichofthefollowingisNOTaresponsibilityoftheToprovideanopiniononthetruthandfairnessofthefinancialToconductanauditinaccordancewithInternationalStandardsonToexpressanopiniononthecompany’sgoingconcernPartLogicofAssertionaboutaccountbalancesattheperiod-Allassets,liabilitiesandequityintereststhatshouldhavebeenrecordedhavebeenrecorded.Assets,liabilities,andequityinterestsAssets,liabilities,andequityinterestsareincludedinthefinancialstatementsatappropriateamountsRights&Theentityholdsorcontrolstherightstoassets,andliabilitiesaretheobligationsoftheentity.ThecomparisonofCandValuation-TheinventoryisincludedinthefinancialstatementsatappropriateamountsIAS2inventorystatestheinventoryshouldbecarriedatthelowerofhistoricalcostandNRV.Rights&AssertionaboutclassesoftransactionsfortheperiodunderAlltransactionsandeventsthatshouldhavebeenrecordedhavebeenrecorded.Transactionsandeventsthathavebeenrecordedhaveoccurredandpertaintotheentity.Amountsandotherdatarelatingtorecordedtransactionsandeventshavebeenrecordedappropriay.TransactionsandeventshavebeenrecordedintheproperTransactionsandeventshavebeenrecordedinthecorrectaccountingperiod.Completenessand舞弊三要素e.g.Cut-eCAssertionaboutpresentationandalldisclosuresthatshouldhavebeenincludedinthefinancialstatementshavebeenincludedOccurrenceandrightsandobligationsdisclosedevents,transactionsandothermattershaveoccurredandpertaintotheentity.AccuracyandfinancialandotherinformationaredisclosedfairlyandatappropriateamountsClassificationandfinancialinformationisappropriaypresentedanddescribed,anddisclosuresareclearlyexpressed.AuditRisk-basedapproachto ysetheriskintheclient’sbusiness,transactionsandsystemsthatcouldleadtomaterialmisstatementDirecttheirtestingtoriskyAuditAuditriskisthe'riskthattheauditorexpressesaninappropriateauditopinionwhenthefinancialstatementsaremateriallymisstated'.TheauditorshallobtainsufficientappropriateauditevidencetoreduceauditrisktoanacceptablylowlevelItismadeupof3componentparts,inherentrisk,controlriskanddetection Thisisthesusceptibilityofanassertiontoamisstatementthatcouldbematerial,eitherindividuallyorwhenaggregatedwithothermisstatements,assumingthattherewerenorelatedinternalcontrols.Theriskofsuisstatementisgreaterforsomeassertionsandrelatedclassesoftransactions,accountbalances,anddisclosuresthanforothers.Forexample,ComplexcalculationsaremorelikelytobemisstatedthansimpleAccountsconsistingofamountsderivedfromaccountingestimatesposegreaterrisksthanaccountsconsistingofrelativelyroutine,factualdata.ExternalcircumstancesgivingrisetobusinessrisksmayalsoinfluenceinherentJune2011Q3DonaldCooperatesanairlinebusiness.Inordertoexpandtheirflightnetwork,DonaldCowillneedtoacquiremoreairplanes;theyhaveplacedordersforanothersixplanesatanestimatedtotalcostof$20mandthecompanyisnotsurewhethertheseplaneswillbereceivedbytheyearend.DonaldCohasorderedsixplaneswhichmaynothavebeenreceivedbytheyearend.Onlyassetswhichphysicallyexistattheyearendshouldbeincludedinproperty,plantandequipment.Inadditionthecompanyhasspentan$15monrefurbishingtheirexistingThisexpenditureneedstobereviewedtoassesswhetheritisofacapitalnatureandshouldbeincludedwithinassetsorexpensedasrepairs.Thecompanyreceivesbookingsfromtravelagentsaswellasdirectlyviatheirwebsite.Thetravelagentsaregivena90-daycreditperiodtopayDonaldCo,however,duetodifficulttradingconditionsanumberofthereceivablesarestrugglingtopay.ThetravelagentswhosellticketsonbehalfoftheairlinearestrugglingtopaytheiroutstandingbalancestoDonaldCo.Thiscouldresultinanincreaseinirrecoverabledebtsandreceivablesbeinervalued.Thewebsitewaslaunchedin2010andhasconsistentlyencountereddifficultieswithcustomercomplaintsthatticketshavebeenbookedandpaidforonlinebutDonaldCohasnorecordofthemandhencehassoldtheseattoanothercustomer.Duetothewebsiteerrorsticketshavebeensoldtwice,thereforesomecustomerswillrequirerefunds. Attheyearendthereisariskthattheticketstoberefundedhavenotbeenremovedfromsales.DonaldCousedtosellticketsviaalargecallcentrelocatedneartotheirheadoffice.However,inMaytheycloseditdownandmadethelargeworkforceredundant.DonaldCoisclosingitscallcentreandmakingtheworkforceredundant;asithasannouncedthistothestaffthenunderIAS37Provisions,ContingentLiabilitiesandContingentAssetsaredundancyprovisionwillberequiredforanystaffnotyetpaidattheyearend.ControlAuditInternalcontrol–Internalcontroldescribestheprocessdesigned,implementedandmaintainedbythosechargedwith ernance,managementandother neltoprovidethemwithreasonableassurancethatanentitywillachieveitsobjectiveswithregardtoThereliabilityoffinancialreporting(internalandTheeffectivenessandefficiencyofoperationsCompliancewithapplicablelawsandControlactivities–Background-Staffintheorderingdepartmentusethislisttoplaceorderswithauthorisedrs.EnsurethepurchasecanenjoycompetitivepriceandsatisfiedqualityAlldeliveriesarecheckedagainsttheordersplacedfilebeforebeingaccepted.Ahand-writtenpre-numberedgoodsreceivednote(GRN)israisedinthegoodsinwardsdepartmentEnsurethegoodsreceivedaretheitemsonordersandwithcorrecttyandgoodTheordersplacedfileisupdatedwiththeGRNnumbertoshowthatthepartshavebeenreceivedEnsureallgoodsorderedhavebeenreceivedintime.Inadditionifnocheckismadeagainstorderthenthecompanymayhavesignificantpurchaseorderswhichareoutstanding,leadingtolostsales.Papersaresentbyallrsfollowingdispatchofgoods. saresenttotheaccountsdepartment,wheretheyarestampedwithauniqueascendingnumber.EnsureallpurchasetransactionshavebeenaccountedfordetailsarematchedtotheGRN,whichisthenattachedtothe.EnsurethesreceivedareconsistentwithGRNsInadditionifnomatadeagainstGRNsthenthecompanymayaccountforthetransactionincorrectly.detailsarethenenteredintothecomputerisedpayablesledger. Theissignedbytheaccountsclerktoconfirmentryintothepayablesledger.EnsurealldreceivedhavebeenaccountedforAfter30days,thepayablesledgerautomaticallygeneratesacomputerisedlistofpaymentstobemade,whichissenectronicallytothechief Thechiefaccountantcomparesthislisttothes,signseachtoindicateapprovalforpaymentEnsureallpaymentshavebeenauthorisedproperlyandthusnoerrororfraudinpaymentsuchaspaymenttwiceControlThisistheriskthatamisstatementcouldoccurinanassertionthatcouldbematerial,eitherindividuallyorwhenaggregatedwithothermisstatements,thatwillnotbeprevented,ordetectedandcorrected,onatimelybasisbytheentity'sinternalcontrol.SomecontrolriskwillalwaysexistbecauseoftheinherentlimitationsofinternalLimitationsofinternalHumanProcessesbeingdeliberaycircumventedbyemployeesandManagementoverridingTheoccurrenceofunforeseenPoorjudgementindecision-making.Internalcontrolfailurescansometimesarisefromindividualdecisionsbeingmadebasedoninadequateinformationprovisionorbyinexperiencedstaff.Humanerrorcancausefailuresalthoughawell-designedinternalcontrolenvironmentcanhelpcontrolthistoacertainextent.Controlprocessesbeingdeliberaycircumventedbyemployeesandothers.Itisverydifficulttocompleypreventdeliberatecircumvention,especiallyifanemployeehasaparticularreason(inhisorheropinion)todoso,suchasthebeliefthathigherbonuseswillbeearned.Managementoverridingcontrols,presumablyinthebeliefthatthecontrolsputinplaceareinconvenientorinappropriateandshouldnotapplytothem.TheoccurrenceofunforeseeablecircumstancesisthefinalcausereferredtointheTurnbullReport.Controlsystemsaredesignedtocopewithagivenrangeofvariablesandwhenaneventhappensoutwiththatrange,thesystemmaybeunabletocope.

Isthefollowingstatementregardingtheassuranceprovidedbyaninternalcontrolsystemtrueorfalse?Aneffectiveinternalcontrolsystemprovidestheauditorwithabsoluteassurancethatcontrolobjectiveshavebeenachieved.AuditDetectionThisistheriskthattheauditor'sprocedureswillnotdetectamisstatementthatexistsinanassertionthatcouldbematerialeitherindividuallyorwhenaggregatedwithothermisstatements.Detectionriskisprimarilytheconsequenceofthefactthattheauditordoesnot,andcannot,examineallavailableevidence(samplingrisk).SamplingSamplingriskistheriskthatauditor’sconclusion,basedonasample,maybedifferentfromtheconclusionthatwouldhavebeenreachediftheentirepopulationweresubjectedtothesameauditprocedure.Samplingriskmustbereducedtoanacceptablylowlevel.Factorswhichincreasenon-samplingPoorNewAuditor'slackofLackofindustryFinancialTimeInformationismaterialifitsomissionormisstatementcouldinfluencetheeconomicdecisionsofuserstakenonthebasisofthefinancialstatementsBoththeamount(ty)andnature(quality)ofmisstatementsneedtobeconsidered.e.g.lackofdisclosureregardingongoinglitigationislikelytobeconsideredmaterial.Toputthisintopracticetheauditorthereforehastosethisownmateriality–thiswillalwaysbeamatterofjudgementandwilldependonthelevelofauditrisk.Thehighertheanticipatedrisk,thelowerthevalueofmaterialitywillbe.ThelevelsethasacriticalimpactontwokeyThelowerthematerialitylevelisset,themoreworkwillneedtobeperformedtoensureauditriskiskeptatanacceptablylowlevel.MaterialitylevelalsoimpactevaluatingtheeffectofWhethertoseekadjustments;Thedegreeofanyauditor’sreportCalculationofDuringplanning,theauditorestablishesmaterialityforfinancialstatementsasawholebyexercisingjudgement.Asetcriteriaisusedasastartingpoint.Forexample:between?and1%ofbetween1and2%oftotalassets;orbetween5and10%ofprofitbeforetax.Thefigurechosenwilldependontheconfidencetheauditorhasintheclient's

WhichofthefollowingwouldconstitutematerialAnerrorof$5,000inrelationtoassetsofApayrollfraudof$100inacompanywhereprofitbeforetaxisNon-disclosureofamaterialFinancialstatementshavebeenpreparedonagoingconcernbasiswhenthecompanyisintheprocessofbeingliquidated.1and3and2and1andPerformancePerformancematerialityislessthanmaterialitycalculatedduringtheplanningstageoftheaudit,toreducetheriskthattheaggregateofuncorrectedandundetectedmisstatementsexceedmaterialityforthefinancialstatementsasawhole.Performancematerialityalsoreferstotheamountoramountssetbytheauditoratlessthanthematerialitylevelorlevelsforparticularclassesoftransactions,accountbalancesordisclosures.Determiningperformancematerialityinvolvestheauditor’sprofessionaljudgement.Itisaffectedbytheirunderstandingoftheentityandtheresultsofriskassessmentprocedures.Itcanbequalitativeandtative.審計邏輯總FactorswhichaffectsampleCLLLLLLEHLMMLLVLLLHLMAuditEofVofVofMLMSampleBusinessBusinessriskresultingfromtheentity'sfailuretomeetitsobjectivesandstrategiesthatmayresultinmaterialmisstatementofthefinancialstatements.Itisusuallysplitintofinancialrisk,operationalriskandcompliancerisk.Theauditorshouldobtainanunderstandingoftheentity'sprocessfor:identifyingbusinessrisksrelatingtofinancialreportingdecidingaboutactionstoaddressthose

WhichofthefollowingisanexampleofanauditThebusinessisexperiencingcashfolwAcustomerhasgoneoutofArhasincreasedInventorymaybeoverstatedduetodamageditemsbeingvaluedatcostinsteadofnetrealisedvalueWhichofthefollowingbestdescribesanauditTheriskprofitswilldecreaseasaresultofintensecompetitionintheTheriskaprovisionhasnotbeenrecognisedresultinginunderstatementofTheriskacustomercannotpaytheirTheriskthecompany’sreputationmaybedamagedbyaproductWhichisthecorrectdefinitionofauditTherisktheauditorfailstodetectmaterialmisstatementsinthefinancialTherisktheauditorexpressesaninappropriateopinionwhenthefinancialstatementsaremateriallymisstated.TherisktheauditorissuesthecorrectopinionintheWhatarethetwoelementsoftheriskofmaterialmisstatementattheassertionInherentriskanddetectionAuditriskanddetectionInherentriskandcontrolDetectionriskandcontrolThedefinitionoftheriskofmaterialmisstatementis'InherentRisk×ControlRisk×DetectionRisk'.Isthisstatementtrueor'Auditrisk'representstheriskthattheauditorwillgiveaninappropriateopiniononthefinancialstatementswhenthefinancialstatementsaremateriallymisstated.Whichofthefollowingcategoriesofriskcanbecontrolledbytheauditor?ControlWhichofthefollowingamendmentstotheauditapproachwouldreducedetectiondecreaseinsampledecreasethematerialitydecreasedecreaseWhichofthefollowingcircumstancesgivesrisetoaninherentTheauditclientmanufacturescomputerCustomersarealloweda$100000initialcreditlimitbeforeaformalcreditlimitisagreedfollowingcreditchecksThefinancedirectorhasresignedandisyettobeWhichofthefollowingcircumstancewouldincreasecontrolTheclientoperatesinahighlyregulatedTheauditorisrelyingontestsofcontrolsandreducingsubstantiveproceduresThereisahighturnoverofstaffinthefinanceWhengaininganunderstandingofthespecificbusinessoperationsofanauditclientwhichofthefollowingmatterswouldanauditorneedtoconsider?Accountingprinciplesandindustryspecificpracticesrelevanttotheclient'sAcquisitionsordisposalsoftheclient'sbusinessLeasingofproperty,plantorequipmentforuseintheclient'sProductsorservicesandmarketsoftheclient'sTheauditorofACowishestoreduceauditWhichofthefollowingactionscouldtheauditortaketoachieveIncreasesampleReducecontrolAssignmoreexperiencedstafftotheengagementWhichTWOofthefollowingstatementsaboutmaterialityareInformationismaterialifitsomissionormisstatementcouldinfluencetheeconomicdecisionsofusersofthefinancialstatements.Materialityisbasedontheauditor'sexperienceandMaterialityisalwaysbasedonMaterialityshouldonlybecalculatedattheplanningstageofthePerformancematerialitylevelsarehigherthanthematerialityforthefinancialstatementsasawhole.IsthisstatementtrueorTheauditorofZCohassetperformancematerialityat$110,000.WhichofthefollowingcouldbethematerialitylevelsetforthefinancialstatementsasawholeforZCo?Duringtheplanningstagesofthefinalaudit,theauditorbelievesthattheprobabilityofgivinganinappropriateauditopinionistoohigh.HowshouldtheauditoramendtheauditplantoresolvethisIncreasethematerialityDecreasetheinherentDecreasethedetection2014/12IsthefollowingstatementtrueorAuditriskisafunctionoftwocomponents,inherentriskandcontrolPartRiskRiskUnderstandingtheentityandiISA315IdentifyingandAssessingtheRisksofMaterialMisstatementthroughUnderstandingtheEntityandivironment.Performriskassessmentprocedurestounderstandtheentityandivironment.Assesstheriskofmaterialmisstatementatthefinancialstatementandassertionlevel.RiskassessmentISA315requiresauditorstoperformthefollowingprocedurestoobtainanunderstandingoftheentityandivironment,includingitsinternalcontrol:yticalyticalVarianceysis-June2008Q3AspartofyourriskassessmentproceduresforZakCo,identifyandprovideapossibleexplanationforunusualchangesinthe estatement.(9marks)ZakCosellsgardenshedsandfurniturefrom15retailoutlets.Salesaremadetoindividuals,with ebeingintheformofcashanddebitcards. AllitemspurchasedaredeliveredtothecustomerusingZak’sowndeliveryvans;mostshedsaretoobigforindividualstotransportintheirownmotorvehicles. Zakindicatethatthecompanyhashadadifficultyear,butarepleasedtopresentsomeacceptableresultstothemembers. estatementsforthelasttwofinancialyearsareshowne31March31MarchCostofGrossOperatingSellingandInterest –Profit/(loss)beforeCashandbankSales–increaseAccordingtothedirectors,Zakhashada‘difficultyear’.Reasonsfortheincreaseinsales emustbeascertainedasthechangedoesnotconformtothedirectors’comments. Itispossiblethattheindustryasawhole,hasbeengrowingallowingZaktoproducethisgoodresult.Costofsales–fallAfallincostofsalesisunusualgiventhatsaleshaveincreasedsignificantly.Thismayhavebeencausedbyanincorrectinventoryvaluationandtheuseofdifferent(cheaper)rswhiaycauseproblemswithfaultygoodsinthenextyear.Administration–fallAfallisunusualgiventhatsalesareincreasingandsoanincreaseinadministrationtosupportthosesaleswouldbeexpected.Expendituremaybeunderstated,ortherehasbeenadecreaseinthenumberofadministrationstaff.Sellinganddistribution–increase42%Thisincreasedoesnotappeartobeinlinewiththeincreaseinsales–sellinganddistributionwouldbeexpectedtoincreaseinlinewithsales.Theremaybeamis-allocationofexpensesfromadministrationorofZak’sdeliveryvansisincreasingresultinginadditionalservicecosts.Interestpayable–smallGiventhatZakhasaconsiderablecashsurplusthisyear,continuingtopayinterestissurprising.Theamountmaybeoverstated–reasonsforlackoffallininterestpaymente.g.loansthatcannotberepaidearly,mustbedetermined. e–newthisyearThisisexpectedgivencashsurplusontheyear,althoughtheamountisstillveryhighindicatingpossibleerrorsintheamountorother egeneratingassetsnotdisclosedonthebalancesheetextract.CommonRatioCalculatethereceivablesdaysratiofromthefollowinginformationforaoneyearCostofA.B.C.D.ThedraftfinancialstatementsofTCoshowthefollowingCostofGrossWhatisthereceivablescollection ysis-riskDec2010Q3UsingtheinformationCalculateFIVEratios,forBOTHyears,whichwouldassisttheaudi iorinplanningtheaudit;and Fromareviewoftheaboveinformationandtheratioscalculated,explaintheauditrisksthatariseanddescribetheappropriateresponsetotheserisks.(10marks)Youaretheaudi iorofWhite&CoandareplanningtheauditofRedsmithCofortheyearended30September2010.Thecompanyproducesprintersandhasbeenaclientofyourfirmfortwoyears;yourauditmanagerhasalreadyhadaplanningmeetingwiththefinancedirector.Hehasprovidedyouwiththefollowingnotesofhismeetingandfinancialstatementextracts.Redsmith’smanagementweredisappointedwiththe2009resultsandsoin2010undertookanumberofstrategiestoimprovethetradingresults.Thisincludedtheintroductionofageneroussales-relatedbonusschemefortheirsalesmenandahighprofileadvertisingn.Inaddition,asmarketconditionsaredifficultfortheircustomers,theyhaveextendedthecreditperiodgiventothem.ThefinancedirectorofRedsmithhasreviewedtheinventoryvaluationpolicyandhasincludedadditionaloverheadsincurredthisyearasheconsidersthemtobeproductionrelated.Heishappywiththe2010resultsandfeelsthattheyareagoodreflectionoftheimprovedtradinglevels.Financialstatementextractsforyearended30CostofGrossOperatingProfitbeforeinterestand–Trade–Dec2010Q3c–Gross12/23=8/18==4/18=Inventory×365=70×365=58Receivable×365=61Payable×365=53×365=44CurrentQuickAuditResponsetoMan