Client: Avilio Limited Prepared by: CA Shew Reviewed by: Subject: Understanding the entity: Overview NATURE AND...

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Client: Avilio Limited Prepared by: CA Shew Reviewed by: Subject: Understanding the entity: Overview NATURE AND BACKGROUND OF THE BUSINESS Year end: 31/10/2018 Date: 06/10/2018 Date: Avilio is a company that builds catamaran yachts in Kariba and was incorporated by Mr. Peter Dunga in 2001. Avilio has been the sole supplier of yachts to five national yacht dealerships in Zimbabwe, from there incorporation till the present day. SHARES AS PER THE MEMORANDUM STATEMENTS AS AT 1 NOVEMBER 2017 Authorised share capital Issued shares Avilio has always been a family operated and owned business but has listed on the JSE two years ago, as the Dunga family wanted to attract investors from outside the family to enable them to expand the business operations to Victoria Falls. BOARD OF DIRECTORS Mr Jake Mofokeng (Chairman of the board) Mr Peter Dunga Mr Joe Dunga (Pietro's son) Mrs Jane Dunga (Pietro's wife) Ms Victoria Zuma 100-01 Page 1 of 1 OF INCORPORATION AND FINANCIAL 10 000 Class A Ordinary Shares & 3 000 Class B Ordinary Shares Non-executive director Managing director (CEO) Marketing director Financial director (CFO) Non-executive director 7 500 Class A Ordinary Shares @ 108zwl each to various shareholders be must the board 2 part of then most 1₂ 3 Mr Mofokeng is an experienced yacht captain and also has an 8% shareholding in Avilio. He was appointed when the company was listed by the shareholders. Ms Zuma is a 22 year old yacht designer who has been an independent non-executive director with Avilio from 1 November 2012. OTHER MATTERS The annual financial statements, which comprised of the Audit Report, Statement of Financial position, Statement of Comprehensive income, Statement of Change in Equity and Notes to the statements, for 2017 were presented to the audit committee. They took their time to ask questions where they were unsure about certain aspects and eventually approved the annual financial statements. The annual financial statements was circulated to all stakeholders. During the 2018 financial year the Dunga family decided that they wanted to regain some of the control in Avilio. Mr. Peter Dunga decided that the only way to establish this, would be to issue the remaining class A authorised shares between himself, his wife and his son. Mr. Peter Dunga called an emergency board meeting where only the executive directors were present, and the resolution was approved by the majority of the directors. The shares were issued at 99zwl each. At the last directors meeting held for the 2018 financial year, it was decided that Jay Sam Chartered Accountants will be re-appointed as the auditors of Avilio till the 2022 financial year end. The board was a bit skeptical about the change in audit partners but Mr. Snow ensured them that you were more than qualified for the task. QUESTION 1 REQUIRED: a) With reference to working paper 100-01, discuss any statutory considerations that you, as the auditor, should adhere to with regard to the share issue that was made to the Dunga family. b) Discuss fully your concerns arising from the audit planning meeting (as documented in work paper 100-20) with reference to the ICAZ Code of Professional Conduct. For each concern listed include a discussion on the matters that should have been considered. Communication skills: Clarity of expression MARKS Sub- total 10 17 1 Total 10 18 Client: Avilio Limited Prepared by: CA Shew Reviewed by: Subject: Understanding the entity: Overview NATURE AND BACKGROUND OF THE BUSINESS Year end: 31/10/2018 Date: 06/10/2018 Date: Avilio is a company that builds catamaran yachts in Kariba and was incorporated by Mr. Peter Dunga in 2001. Avilio has been the sole supplier of yachts to five national yacht dealerships in Zimbabwe, from there incorporation till the present day. SHARES AS PER THE MEMORANDUM STATEMENTS AS AT 1 NOVEMBER 2017 Authorised share capital Issued shares Avilio has always been a family operated and owned business but has listed on the JSE two years ago, as the Dunga family wanted to attract investors from outside the family to enable them to expand the business operations to Victoria Falls. BOARD OF DIRECTORS Mr Jake Mofokeng (Chairman of the board) Mr Peter Dunga Mr Joe Dunga (Pietro's son) Mrs Jane Dunga (Pietro's wife) Ms Victoria Zuma 100-01 Page 1 of 1 OF INCORPORATION AND FINANCIAL 10 000 Class A Ordinary Shares & 3 000 Class B Ordinary Shares Non-executive director Managing director (CEO) Marketing director Financial director (CFO) Non-executive director 7 500 Class A Ordinary Shares @ 108zwl each to various shareholders be must the board 2 part of then most 1₂ 3 Mr Mofokeng is an experienced yacht captain and also has an 8% shareholding in Avilio. He was appointed when the company was listed by the shareholders. Ms Zuma is a 22 year old yacht designer who has been an independent non-executive director with Avilio from 1 November 2012. OTHER MATTERS The annual financial statements, which comprised of the Audit Report, Statement of Financial position, Statement of Comprehensive income, Statement of Change in Equity and Notes to the statements, for 2017 were presented to the audit committee. They took their time to ask questions where they were unsure about certain aspects and eventually approved the annual financial statements. The annual financial statements was circulated to all stakeholders. During the 2018 financial year the Dunga family decided that they wanted to regain some of the control in Avilio. Mr. Peter Dunga decided that the only way to establish this, would be to issue the remaining class A authorised shares between himself, his wife and his son. Mr. Peter Dunga called an emergency board meeting where only the executive directors were present, and the resolution was approved by the majority of the directors. The shares were issued at 99zwl each. At the last directors meeting held for the 2018 financial year, it was decided that Jay Sam Chartered Accountants will be re-appointed as the auditors of Avilio till the 2022 financial year end. The board was a bit skeptical about the change in audit partners but Mr. Snow ensured them that you were more than qualified for the task. QUESTION 1 REQUIRED: a) With reference to working paper 100-01, discuss any statutory considerations that you, as the auditor, should adhere to with regard to the share issue that was made to the Dunga family. b) Discuss fully your concerns arising from the audit planning meeting (as documented in work paper 100-20) with reference to the ICAZ Code of Professional Conduct. For each concern listed include a discussion on the matters that should have been considered. Communication skills: Clarity of expression MARKS Sub- total 10 17 1 Total 10 18

Answer rating: 100% (QA)

a Statutory Considerations for Share Issue to Dunga Family Compliance with Memorandum of Incorporation MOI The auditor should ensure that the share issue complies with the companys MOI This includes c... View the full answer