(c) Your firm has provided financial advice to the...

第1题

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

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

services to RBG. (10 marks)

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第2题

The finance director of Blod Co, Uma Thorton, has requested that your firm type the financ

ial statements in the form

to be presented to shareholders at the forthcoming company general meeting. Uma has also commented that the

previous auditors did not use a liability disclaimer in their audit report, and would like more information about the use

of liability disclaimer paragraphs.

Required:

(b) Discuss the ethical issues raised by the request for your firm to type the financial statements of Blod Co.

(3 marks)

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第3题

（c) Maxwell Co is audited by Lead & Co, a firm of Chartered Certified Accountants. Leo Sabat has enquired as to

whether your firm would be prepared to conduct a joint audit in cooperation with Lead & Co, on the future

financial statements of Maxwell Co if the acquisition goes ahead. Leo Sabat thinks that this would enable your

firm to improve group audit efficiency, without losing the cumulative experience that Lead & Co has built up while

acting as auditor to Maxwell Co.

Required:

Define ‘joint audit’, and assess the advantages and disadvantages of the audit of Maxwell Co being conducted

on a ‘joint basis’. (7 marks)

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第4题

（b) Chatam, a limited liability company, is a long-standing client. One of its subsidiarie

(b) Chatam, a limited liability company, is a long-standing client. One of its subsidiaries, Ayora, has made losses

for several years. At your firm’s request, Chatam’s management has made a written representation that goodwill

arising on the acquisition of Ayora is not impaired. Your firm’s auditor’s report on the consolidated financial

statements of Chatam for the year ended 31 March 2005 is unmodified. Your firm’s auditor’s report on the

financial statements of Ayora is similarly unmodified. Chatam’s Chief Executive, Charles Barrington, is due to

retire in 2006 when his share options mature. (6 marks)

Required:

Comment on the ethical and other professional issues raised by each of the above matters and their implications,

if any, for the continuation of each assignment.

NOTE: The mark allocation is shown against each of the three issues.

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第5题

5 You are an audit manager in Fox & Steeple, a firm of Chartered Certified Accountants, responsible for allocating staff

to the following three audits of financial statements for the year ending 31 December 2006:

(a) Blythe Co is a new audit client. This private company is a local manufacturer and distributor of sportswear. The

company’s finance director, Peter, sees little value in the audit and put it out to tender last year as a cost-cutting

exercise. In accordance with the requirements of the invitation to tender your firm indicated that there would not

be an interim audit.

(b) Huggins Co, a long-standing client, operates a national supermarket chain. Your firm provided Huggins Co with

corporate financial advice on obtaining a listing on a recognised stock exchange in 2005. Senior management

expects a thorough examination of the company’s computerised systems, and are also seeking assurance that

the annual report will not attract adverse criticism.

(c) Gray Co has been an audit client since 1999 after your firm advised management on a successful buyout. Gray

provides communication services and software solutions. Your firm provides Gray with technical advice on

financial reporting and tax services. Most recently you have been asked to conduct due diligence reviews on

potential acquisitions.

Required:

For these assignments, compare and contrast:

(i) the threats to independence;

(ii) the other professional and practical matters that arise; and

(iii) the implications for allocating staff.

(15 marks)

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第6题

5 You are an audit manager in Dedza, a firm of Chartered Certified Accountants. Recently,

you have been assigned

specific responsibility for undertaking annual reviews of existing clients. The following situations have arisen in

connection with three client companies:

(a) Dedza was appointed auditor and tax advisor to Kora Co, a limited liability company, last year and has recently

issued an unmodified opinion on the financial statements for the year ended 30 June 2005. To your surprise,

the tax authority has just launched an investigation into the affairs of Kora on suspicion of underdeclaring income.

(7 marks)

Required:

Identify and comment on the ethical and other professional issues raised by each of these matters and state what

action, if any, Dedza should now take.

NOTE: The mark allocation is shown against each of the three situations.

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第7题

You are an audit manager in Cedar & Co, responsible for the audit of Chestnut Co, a la

rge company which provides information technology services to business customers. The finance director of Chestnut Co, Jack Privet, contacted you this morning, saying:

‘I was alerted yesterday to a fraud being conducted by members of our sales team. It appears that several sales representatives have been claiming reimbursement for fictitious travel and client entertaining expenses and inflating actual expenses incurred. Specifically, it has been alleged that the sales representatives have claimed on expenses for items such as gifts for clients and office supplies which were never actually purchased, claimed for business-class airline tickets but in reality had purchased economy tickets, claimed for non-existent business mileage and used the company credit card to purchase items for personal use.

I am very worried about the scale of this fraud, as travel and client entertainment is one of our biggest expenses. All of the alleged fraudsters have been suspended pending an investigation, which I would like your firm to conduct. We will prosecute these employees to attempt to recoup our losses if evidence shows that a fraud has indeed occurred, so your firm would need to provide an expert witness in the event of a court case. Can we meet tomorrow to discuss this potential assignment？’

Chestnut Co has a small internal audit department and in previous years the evidence obtained by Cedar & Co as part of the external audit has indicated that the control environment of the company is generally good. The audit opinion on the financial statements for the year ended 31 March 2011 was unmodified.

Required:

(a) Assess the ethical and professional issues raised by the request for your firm to investigate the alleged fraudulent activity. (6 marks)

(b) Explain the matters that should be discussed in the meeting with Jack Privet in respect of planning the investigation into the alleged fraudulent activity. (6 marks)

(c) Evaluate the arguments for and against the prohibition of auditors providing non-audit services to audit clients. (6 marks)

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第8题

3 You are an audit manager in Webb & Co, a firm of Chartered Certified Accountants. Your audit client, Mulligan Co,

designs and manufactures wooden tables and chairs. The business has expanded rapidly in the last two years, since

the arrival of Patrick Tiler, an experienced sales and marketing manager.

The directors want to secure a loan of $3 million in order to expand operations, following the design of a completely

new range of wooden garden furniture. The directors have approached LCT Bank for the loan. The bank’s lending

criteria stipulate the following:

‘Loan applications must be accompanied by a detailed business plan, including an analysis of how the finance will

be used. LCT Bank need to see that the finance requested is adequate for the proposed business purpose. The

business plan must be supported by an assurance opinion on the adequacy of the requested finance.’

The $3 million finance raised will be used as follows:

$000

Construction of new factory 1,250

Purchase of new machinery 1,000

Initial supply of timber raw material 250

Advertising and marketing of new product 500

Your firm has agreed to review the business plan and to provide an assurance opinion on the completeness of the

finance request. A meeting will be held tomorrow to discuss this assignment.

Required:

(a) Identify and explain the matters relating to the assurance assignment that should be discussed at the meeting

with Mulligan Co. (8 marks)

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第9题

You have been appointed as deputy Chief Financial Officer to a large multinational pharmac

eutical company with trading interests in 24 countries in sub-Saharan Africa, South America and the Indian sub-continent. Your company also has important trading links with the United States, Malaysia and Singapore. There have been a number of issues arising in the previous six months which have impacted upon the company’s business interests.

(i) Following an investigation you discover that commissions were paid to a senior official in one country to ensure that the local drug licensing agency concerned facilitated the acceptance of one of your principal revenue earning drugs for use within its national health service.

(ii) You have discovered that an agent of your firm, aware that the licensing agreement might be forthcoming,

purchased several call option contracts on your company’s equity.

(iii) A senior member of the firm’s treasury team has been taking substantial positions in currency futures in order to protect the risk of loss on the translation of dollar assets into the domestic currency. Over the last 12 months significant profits have been made but the trades do not appear to have been properly authorised. You discover that a long position in 50, $250,000 contracts is currently held but over the last four weeks the dollar has depreciated by 10% and all the signs are that it will depreciate considerably more over the next two months.

(iv) One drug company has managed to copy a novel drug that you have just released for the treatment of various forms of skin cancer. You have patent protection in the country concerned but your company has not been able to initiate proceedings through the local courts. Contacts with the trade officials at your embassy in the country concerned suggest that the government has made sure that the proceedings have not been allowed to proceed.

The company’s chief financial officer has asked you to look into these issues and, with respect to (iv), any World Trade

Organisation (WTO) agreements that might be relevant, and to advise her on how the company should proceed in each case.

Required:

Prepare a memorandum advising the Chief Financial Officer on the issues involved and recommending how she should, in each case and in the circumstances, proceed.

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第10题

（a) You are an audit manager in Weston & Co which is an international firm of Chartere

(a) You are an audit manager in Weston & Co which is an international firm of Chartered Certified Accountants with branches in many countries and which offers a range of audit and assurance services to its clients. Your responsibilities include reviewing ethical matters which arise with audit clients, and dealing with approaches from prospective audit clients.

The management of Jones Co has invited Weston & Co to submit an audit proposal (tender document) for their consideration. Jones Co was established only two years ago, but has grown rapidly, and this will be the first year that an audit is required. In previous years a limited assurance review was performed on its financial statements by an unrelated audit firm. The company specialises in the recruitment of medical personnel and some of its start up funding was raised from a venture capital company. There are plans for the company to open branches overseas to help recruit personnel from foreign countries.

Jones Co has one full-time accountant who uses an off-the-shelf accounting package to record transactions and to prepare financial information. The company has a financial year ending 31 March 2015.

The following comment was made by Bentley Jones, the company’s founder and owner-manager, in relation to the audit proposal and potential audit fee:

‘I am looking for a firm of auditors who will give me a competitive audit fee. I am hoping that the fee will be quite low, as I am willing to pay more for services that I consider more beneficial to the business, such as strategic advice. I would like the audit fee to be linked to Jones Co’s success in expanding overseas as a result of the audit firm’s advice. Hopefully the audit will not be too disruptive and I would like it completed within four months of the year end.’

Required:

(i) Explain the specific matters to be included in the audit proposal (tender document), other than those relating to the audit fee; and (8 marks)

(ii) Assuming that Weston & Co is appointed to provide the audit service to Jones Co, discuss the issues to be considered by the audit firm in determining a fee for the audit including any ethical matters raised. (6 marks)

(b) Ordway Co is a long-standing audit client of your firm and is a listed company. Bobby Wellington has acted as audit engagement partner for seven years and understands that a new audit partner needs to be appointed to take his place. Bobby is hoping to stay in contact with the client and act as the engagement quality control reviewer in forthcoming audits of Ordway Co.

Required:

Explain the ethical threats raised by the long association of senior audit personnel with an audit client and the relevant safeguards to be applied, and discuss whether Bobby Wellington can act as engagement quality control reviewer in the future audits of Ordway Co. (6 marks)

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（c) Your firm has provided financial advice to the Pholey family for many years and this h