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business
auditing 12th
Auditing 12th Edition Alan Millichamp, John Taylor - Solutions
Imperiol, a limited liability company, manufactures and distributes electrical and telecommunications accessories, household durables (e.g. sink and shower units) and building systems (e.g. air-conditioning, solar heating, security systems). The company has undergone several business restructurings
Sweete & Lowe are the auditors of BigBoy plc and have been asked as a special-purpose audit engagement to express an opinion on the present liquidity of the company and, in particular, the ability of the company to repay some proposed loan finance. The report is required by the Unlikely Bank plc in
List the procedures that should be adopted in compiling financial statements.
The directors of Dunbar Holdings are seeking to win an award for business excellence. As part of the award process, reporting accountants have to assess the business performance against a set of predetermined criteria set out in the award documentation. This covers such matters as HR policy, staff
State the objectives of an assurance engagement.
What is an attest function?
What is due diligence and when is it performed?
What is a direct reporting engagement – give an example?
How should a direct reporting engagement be carried out?
What is negative assurance and when is it appropriate?
What should an accountant do if the prospective financial information is based on unrealistic assumptions?
What should appear in a direct reporting engagement report?
What are the three criteria for assurance assignments?
What is the role of the responsible party?
To whom are the accountants reporting?
What approach will the accountants take?
What two forms of reporting are there?
What is the difference between them in terms of the accountants’ approach to the assignment?
When should accountants give a limited conclusion and what form will it take?
You are a qualified accountant and work for a firm of external auditors which has recently been appointed to the audit of a local government body. The authority had enjoyed a very good working relationship with the previous external auditor, despite going through a period of severe financial
You are the head of internal audit for Gotham City and have received an email from Councillor Joe Kerr. It appears that the Councillor has just returned from a public sector auditing conference where the terms 'value for money' and 'internal control' were referred to and he is keen to know more
Who is responsible for the audit of local authorities in Scotland?
Little Puddleton Council is a major provider of social housing in the district. It is important that Little Puddleton has a planned repairs programme to ensure its properties remain fit for occupation and to prolong the useful life of the buildings.The organization is aware that the key to an
What is meant by regularity?
What are the regulations governing the conduct of internal audit in the UK?
What are the major functions of internal audit in the public sector?
How does internal audit in the public sector differ from that in the private sector?
How does external audit in England differ from that in Scotland, Wales and Northern Ireland?
How has the remit of external audit in the public sector been extended from that in the private sector?
Give three indicators which might aid the auditor in assessing the organization’s approach to VFM.
Diggitup plc is a quoted company heavily engaged in the waste disposal industry and engaged also in some open cast mining in land reclamation projects. The company sees itself as performing an unpleasant duty which the rest of the public is unwilling to do for itself. The company has inevitably
List some major considerations regarding environmental factors and the audit.
The Chemicon Company produces a range of industrial fertilizers and insecticides for sale to agricultural businesses, farmers and the general public. The items, some of which are extremely toxic, are produced under controlled environmental conditions to avoid accidental spillages and contamination.
What are the major environmental standards?
How might environmental issues affect the audit opinion?
What internal control issues concern environmental matters?
What substantive procedures may an auditor adopt?
How are auditors involved in corporate social responsibility issues?
Megablast Inc. trades internationally as a manufacturer and distributor of electrical goods ranging from consumer goods (TVs, washing machines, etc.), to electrical equipment and electronic components. Its shares are currently listed on the New York Stock Exchange, and it is subject to the
List some influences for change in auditing.
Here are some points based on extracts from articles in the accounting press:• The UK’s reporting regulator wants greater power to sanction and discipline audit firms.• The Financial Reporting Council is pushing for ‘a wider range of sanctions to address shortcomings in audit quality’.•
Where do new audit regulations come from?
List advantages and disadvantages of auditors taking other work from audit clients.
What approach to regulation has been taken by the USA?
How does it differ from the UK approach?
How can the audit profession benefit from the developing world?
What is performance materiality?
What matters should be considered in reviewing the provision for bad and doubtful debts?
Outline the procedures for a positive circulation of receivables.
What audit evidence accrues from the bank letter?
Summarize the contents of the standard bank letter.
What are the Companies Act rules on loans to directors and connected persons?
Song & Danse LLP is a city firm of Chartered Certified Accountants. The firm's accounts are produced by the administration partner but are subject to audit by Blanket, Mange LLP, another firm of Chartered Certified Accountants. In June 202X, a partner in Song & Danse who was suffering from overwork
What are the auditor’s duties on such loans?
List the general procedures for verifying liabilities.
Company A has a number of long- and short-term payables, accruals and provisions in its Statement of Financial Position.Required:(a) Describe the audit procedures you would apply to each of the three items listed below, including those relating to disclosure.(i) A 10-year bank loan with a variable
List some liabilities that may be omitted.
Curdco is a company that runs a chain of fast-food restaurants. The company has a centralized operating style and managers of individual restaurants have very limited decision-making powers on day-to-day operational matters. The company's centralized administration is responsible for the buying of
How can the auditor determine if all liabilities are included?
What is the difference between a provision and an accrual?
What factors about a liability must be verified by an auditor?
How might audit evidence of the truth and fairness of share capital be obtained?
How might pending legal matters be dealt with by an auditor?
List some audit procedures in connection with accounting estimates.
Bing Properties plc is a large property developer in the north of England. It has two divisions, industrial and domestic. The industrial division builds factories and offices for various clients and also contracts on major construction projects such as schools and hospitals as one of several
What approaches to a computer audit can auditors take?
Furnistores Ltd is a wholesaler of furniture (such as chairs, tables and cupboards). Furnistores buys the furniture from six major manufacturers and sells them to over 600 different customers ranging from large retail chain stores to smaller owner-controlled businesses.The Receivables balance
What types of CAATs are there?
How does the use of embedded software provide good audit evidence?
What internal controls would you expect to find in a computer environment?
What is test data?
How might data analytics software assist the audit process?
Charlatan Furniture Ltd is a large company engaged in the manufacture and import of self-assembly furniture kits.Their system for the placing of purchase orders is:(a) Requisitions are drawn up by production control, by marketing and by stores accounting who keep stores records on a computer.
What are the objectives of working papers?
Rapidrise Ltd is a firm of plumbers' and electricians' merchants which has expanded very rapidly to a turnover of some £13m in five years. There are three founder director/shareholders and some 20 staff and six clerical staff including Ted who is a part qualified accountant. The system for
List the content of a Permanent File.
Alset Ltd has 12 electrical appliance shops in the Midlands. The company maintains a warehouse in Bilston and supplies goods to the branches using two lorries. There is a central accounts department at the warehouse with five staff under the chief accountant Louise.Supplies are ordered for the
List the content of a Current File.
Who owns an accountant’s working papers?
What is a lien and why might it be important to an accountant?
How long should auditors retain their working papers?
In the case of significant matters that require the exercise of judgement, what should work papers do?
List the advantages and disadvantages of standardizing working papers.
Shark Estate Agents Ltd is a company offering estate agency services to the public through a network of branches in the Midlands. The company has some 270 staff in all. The board consists of six people, a part-time chair, a chief executive, two other full-time executives and two representatives of
Why might an external auditor rely on the work of an internal auditor?
(a) Discuss the advantages and disadvantages of outsourcing an internal audit department to a firm other than the auditors.(b) MonteHodge Co. has a sales income of $253m and employs 1,200 people in 15 different locations. MonteHodge Co. provides various financial services from pension and
In what way may they co-operate?
Zupacars Ltd sells cars, car parts and petrol from 20 different garages. Each branch has up to 20 staff working there, although most of the accounting systems are centralized at the company's head office. Branches enter data over a network directly into head office systems. Because of the nature of
How may the external auditors assess the internal auditors and their work?
What factors influence the extent of reliance in a particular area?
How might the co-operation be planned and controlled?
What implications does all this have for the external auditor’s working papers?
The audit of Binkle Ltd for the year ended 31 December 202X was completed on 2 February 202Y. Materiality was judged to be £150,000. As all tests yielded satisfactory results, the auditors, Blast & Pott, issued a clean opinion.In accordance with the quality control procedures operating in the
Megachem plc is a multinational agri-business dealing in the import and export of agricultural produce, the manufacture and sale of fertilizers and pesticides, and the sale of agricultural machinery worldwide. During the audit, the auditors discover:(a) There are several delivery notes for
Define errors and frauds.
What are the auditor’s duties towards errors?
What is the relevance of materiality to these matters?
Who is responsible for internal control in a company?
What should auditors do if they discover an irregularity in the form of (i) A material error or (ii) Fraud?
To whom should auditors report such irregularities?
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