Uol Past Year Paper

This paper is non to be removed from the Examination H eithers UNIVERSITY OF capital of the United Kingdom AC3093 ZB (279 0093) BSc Degrees and Diplomas for Graduates in Economics, Management, finance and the Social Sciences, the Diplomas in Economics and Social Sciences and Access lane Auditing and Assurance Friday, 18 May 2012 10. 00am to 1. 00pm Candidates should manage FOUR of the interest EIGHT questions devil from plane section A, ONE from Section B and ONE further question from from each one section. All questions carry equal marks. University of capital of the United Kingdom 2012 UL12/0010 D01 PLEASE TURN OVER rascal 1 of 6SECTION A execute noneinal questions from this section and non more than than unity further question. (You atomic number 18 reminded that four questions in total argon to be examine with at least(prenominal) atomic number 53 from Section B. ) 1. You have rightful(prenominal) been approached by the newly- name ripened regulator fo r the pecuniary processs (including be and scrutinizeing) industry in a unpolished which has previously had little or no regulation on the provision of fiscal in strainingation. The Regulator has said that his first of all precession is to change the caliber of annual financial statements which the major(ip) companies in the country publish.The Regulator has naturalized working set offies to examine improvements in the quality of accounting and financial inform practices. An different working troupe has been established to examine the quality of canvas case work. The Regulator tells you that he wants your working party to put forward proposals which will improve the quality of audit traceing. He is touch that present practices aloneow individual auditors to calculate in their own way. This has led to confusion, since at that place atomic number 18 so many dissimilar styles of audit report. The Regulator believes that a standardize approach will reduce thi s confusion.He is alert that in that respect are international auditing standards on auditing and asks you to examine the possibility of adopting an approach obtainable with the international standards. He asks you to look at the following specific aspects of audit account To whom the audit report is addressed A reference to the framework of accounting A reference to the framework of auditing Some give-and- convey of what okay end be and what pl down the stairsnot be esteem from an audit The style of opinion on the financial statements, and Any some other issues you hazard might be relevant. needful (a) (b) Draft a report from your working party on the specific issues mentioned above. (15 marks) Draft an app lay offix to this report setting out the advantages and disadvantages of a value approach to audit reporting. (10 marks) UL12/0010 D01 scalawag 2 of 6 2. You are the audit checkmate of Lottolife, a leisure establishment which includes a lay off and a eati ng place candid to the world-wide public. The management consists of a sr. managing director and leash assistant managers each four are paid a salary with a realize-related bonus.Both the bar and the restaurant are dependent on everyday workers who are paid an hourly consecrate in immediate payment at the end of the week. To al-Quran the hours worked, each employee has to clock in and clock out using a clock card inserted into a tool which records the magazine in and out. There is no other check on the truth of the recorded hours. Workers are hired by and by a short interview by one of the assistant managers who completes a form to record the details of the successful applicant. The telephoner has a poor reputation as an employer and expects its module to work long hours.Consequently employees dispose not to stay very long. On resigning, an employee has to sign a form which is endorsed by the assistant manager and is then pass on to the Payroll Department so that t he employees conk out pay packet can be made up and the employee interpreted off the payroll. There are neer full applicants to fill the vacancies and almost no applicant is rejected. Both pay and supply morale are low. In an attempt to boost the pay and attract more and better staff, one of the assistant managers has suggested compensable a weekly bonus from the cash tips left by customers.The tips would be split among the workers rather than being lingoed as part of the outlet. There would be no record unbroken of the tips which would mean that the workers would not be taxed on their bonus. It also has a members-only club which is a licensed gambling gambling casino where various forms of gambling take place. chthonian the licensing rules only trained staff can be engaged and these are fair hale paid jobs. Occasionally if in that respect is a staff shortage on the catering side in the casino, members of the bar and restaurant staff are brought in, abandoned new un iforms and are instructed to help out.Technically this is against the playing period rules, but the casino management recollect that if the breach is ever discovered by the authorities, the worst thing that might ascertain would be the casino having to pay a fine. They are aware however that it is executable that the licence could be withdrawn and the casino could be forced to close. Required (a) (b) signalise possible impuissancees in the control surroundings in Lottolife. (15 marks) Suggest various audit procedures which might be appropriate in the particular circumstances of Lottolife. (10 marks) UL12/0010 D01 Page 3 of 6 3.You have just been appointed auditor of Brutons Ltd, a down in the mouth family-owned gentlemens tailors and clothes shop. It is based in the South-West of England where it has six shops in contrasting towns. The clothes it stocks and sells are at the focal ratio end of the price range, appealing to the wealthier customer. The company, similar its cu stomers is old-fashioned. In fact, the decor of the shops has not changed since the 1960s. The guide of the family and major shareholder, John Bruton, is aged 86 and sees no reason to change what has for l years been a winning recipe a top quality service and a premium price.He dismisses the falling clear revenue and lower profits as scarce consequences of the tough economic climate. The three other shareholders are Brutons sons, the youngest of whom is 53. The sons have essay to get their mystify to change remains since they have seen similar companies in other regions increase their market share with the ne devilrk and through a antecedent make-over of their retail outlets. They accept that their plans will hail about ? 10m and they will need a bank loan to finance what is effectively a re-branding exercise.They believe, though they have not done a detailed analysis, that internet sales over the bordering three years would bring in replete cash to repay the loan and enough profit to cover loan interest. subsequently that, in that location would be clear profit for about ten years until the next rebranding was needed. In addition, the leases on the shops are all firing to expire in the next fin years. These can be regenerate but it will be embodyly as the premises are all in city centre locations which are highly sought after by companies in the food and drinks industry.With insufficient cash reserves, Brutons would need further bank financing to cover the capital cost of renewing these long term leases. The sons are also urging their father to flip over buying in cheaper clothes trade from Asia as way of boosting sales and profits. The father who is very patriotic has rejected this suggestion, choosing kind of to stay with British-based suppliers who have served him well since he began in business. Brutons accounting system dates from the 1960s. It is mainly manual with sales staff making out a written receipt for each sale.Cash is put through a till but there is no reconciliation of receipts and takings through the till. The shops do have computer address card facilities but again there is no reconciliation of sales and card receipts. The main element of control is the heraldic bearing of one of Brutons sons. Each is creditworthy for two shops which they attend on take turns days. This close supervision has seemed to work well until, Roger, the eldest son, had a heart round down and was unable to work for six months. During this time, his two brothers supervised the six shops visiting one every three days.Roger is now back at work though he only works reduced hours at one location. Required (a) (b) Identify the major elements of audit risk in Brutons Ltd. (15 marks) condone the steps you would have interpreted before formally accepting grant as auditor of Brutons Ltd. (10 marks) UL12/0010 D01 Page 4 of 6 4. You have just been appointed the Quality Assurance spouse in Raiffes &038 Co. , Chartered Acc ountants and Registered Auditors. You are presently reviewing a sample of the audit files of five audit clients.Your aim is to ensure that the quality of audit work at least matches and, if possible, exceeds the minimum standard required under the international auditing standards and UK legislation. You have made the following list of items which cause you concern In Albany Ltd, the audit team illustrious that although accurate inventory records had not been kept during the year, the year-end stock count was tightly controlled and a detailed review of gross profit margins suggested little chance of corporeal error. On this basis the audit manager had recommended signing an unmodified opinion.In Boverton plc, a weakness in internal control had been detected early in the audit. The weakness pertain payroll and may have allowed overpayments to documented staff and/or payments to fictitious staff. Because payroll is such a sensitive area, the audit team had done nothing more than note the weakness in the audit file, highlighting the issue for partner review. In Chirley plc, the company had failed to comply with the relevant financial reporting standard for pension costs. The bet is one of disclosure rather than measurement.The Finance conductor simply will not accept that the standard is correct and insists that he is right. The recommendation from the audit team is to agree with the Finance Director since the accounting meter are right and the firm should not risk upsetting a major client. In Dalton, a fraud involving the vote counter had been discovered. The amount involved was im somatic to the financial statements. When the Finance Director was told about the fraud, he was unmoved, claiming that he knew about the fraud which had been going on since the man was first employed five years ago.The Finance Director said that he allowed the cashier to tack his salary in this way since it was cheaper than magnanimous him a pay rise. In Exeter Ltd, this wa s the first year of the audit appointment. The fixed summation register had not been maintained for the last five years meaning that it was unthinkable to assess from the records how long the assets had been in use. bestow tangible fixed assets are material to the financial statements. The team had immediately halt work on fixed assets concluding that the audit report would have to be modified on the grounds of disagreement. Required (a) Evaluate the situation in each of the five cases and suggest an appropriate job of action in each including if infallible modifying the auditors report. (15 marks) Suggest steps which the firm should take to ensure that all its audits come up tot the appropriate standard. (10 marks) (b) UL12/0010 D01 Page 5 of 6 SECTION B Answer ONE question from this section and not more than one further question. (You are reminded that four questions in total are to be attempted with at least two from Section A. ) 5.Because audit time is not unlimited, s ampling is a key fruit component of any audit strategy. Explain the various factors which auditors consider when setting up their sampling plan. 6. Critically evaluate the goal of an audit from the point of view of the readers of the auditors report. 7. You are required to write a general theory of auditing of financial statements. What concepts and assumptions would you include and what economic consumption would each serve? 8. Critically evaluate the measures taken in the IFAC Code of morals to safeguard auditor independence. END OF newspaper publisher UL12/0010 D01 Page 6 of 6