The finance director of Blod Co, Uma Thorton, has requested that your firm type the financial statements in the formto be presented to shareholders at the forthcoming company general meeting. Uma has also commented that theprevious auditors did not use a liability disclaimer in their audit report, and would like more information about the useof 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)
The finance director of Blod Co, Uma Thorton, has requested that your firm type the financial 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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(iii) Tyre has entered into two new long lease property agreements for two major retail outlets. Annual rentals are paidunder these agreements. Tyre has had to pay a premium to enter into these agreements because of the outlets’location. Tyre feels that the premiums paid are justifiable because of the increase in revenue that will occurbecause of the outlets’ location. Tyre has analysed the leases and has decided that one is a finance lease andone is an operating lease but the company is unsure as to how to treat this premium. (5 marks)Required:Advise the directors of Tyre on how to treat the above items in the financial statements for the year ended31 May 2006.(The mark allocation is shown against each of the above items)
5 You are an audit manager in Dedza, a firm of Chartered Certified Accountants. Recently, you have been assignedspecific responsibility for undertaking annual reviews of existing clients. The following situations have arisen inconnection with three client companies:(a) Dedza was appointed auditor and tax advisor to Kora Co, a limited liability company, last year and has recentlyissued 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 whataction, if any, Dedza should now take.NOTE: The mark allocation is shown against each of the three situations.
(b) You are an audit manager with specific responsibility for reviewing other information in documents containingaudited financial statements before your firm’s auditor’s report is signed. The financial statements of Hegas, aprivately-owned civil engineering company, show total assets of $120 million, revenue of $261 million, and profitbefore tax of $9·2 million for the year ended 31 March 2005. Your review of the Annual Report has revealedthe following:(i) The statement of changes in equity includes $4·5 million under a separate heading of ‘miscellaneous item’which is described as ‘other difference not recognized in income’. There is no further reference to thisamount or ‘other difference’ elsewhere in the financial statements. However, the Management Report, whichis required by statute, is not audited. It discloses that ‘changes in shareholders’ equity not recognized inincome includes $4·5 million arising on the revaluation of investment properties’.The notes to the financial statements state that the company has implemented IAS 40 ‘Investment Property’for the first time in the year to 31 March 2005 and also that ‘the adoption of this standard did not have asignificant impact on Hegas’s financial position or its results of operations during 2005’.(ii) The chairman’s statement asserts ‘Hegas has now achieved a position as one of the world’s largestgenerators of hydro-electricity, with a dedicated commitment to accountable ethical professionalism’. Auditworking papers show that 14% of revenue was derived from hydro-electricity (2004: 12%). Publiclyavailable information shows that there are seven international suppliers of hydro-electricity in Africa alone,which are all at least three times the size of Hegas in terms of both annual turnover and population supplied.Required:Identify and comment on the implications of the above matters for the auditor’s report on the financialstatements of Hegas for the year ended 31 March 2005. (10 marks)
2 Your audit client, Prescott Co, is a national hotel group with substantial cash resources. Its accounting functions arewell managed and the group accounting policies are rigorously applied. The company’s financial year end is31 December.Prescott has been seeking to acquire a construction company for some time in order to bring in-house the buildingand refurbishment of hotels and related leisure facilities (e.g. swimming pools, squash courts and restaurants).Prescott’s management has recently identified Robson Construction Co as a potential target and has urgently requestedthat you undertake a limited due diligence review lasting two days next week.Further to their preliminary talks with Robson’s management, Prescott has provided you with the following brief onRobson Construction Co:The chief executive, managing director and finance director are all family members and major shareholders. Thecompany name has an established reputation for quality constructions.Due to a recession in the building trade the company has been operating at its overdraft limit for the last 18months and has been close to breaching debt covenants on several occasions.Robson’s accounting policies are generally less prudent than those of Prescott (e.g. assets are depreciated overlonger estimated useful lives).Contract revenue is recognised on the percentage of completion method, measured by reference to costs incurredto date. Provisions are made for loss-making contracts.The company’s management team includes a qualified and experienced quantity surveyor. His mainresponsibilities include:(1) supervising quarterly physical counts at major construction sites;(2) comparing costs to date against quarterly rolling budgets; and(3) determining profits and losses by contract at each financial year end.Although much of the labour is provided under subcontracts all construction work is supervised by full-time sitemanagers.In August 2005, Robson received a claim that a site on which it built a housing development in 2002 was notproperly drained and is now subsiding. Residents are demanding rectification and claiming damages. Robsonhas referred the matter to its lawyers and denied all liability, as the site preparation was subcontracted to SarwarServices Co. No provisions have been made in respect of the claims, nor has any disclosure been made.The auditor’s report on Robson’s financial statements for the year to 30 June 2005 was signed, withoutmodification, in March 2006.Required:(a) Identify and explain the specific matters to be clarified in the terms of engagement for this due diligencereview of Robson Construction Co. (6 marks)
5 You are an audit manager in Fox Steeple, a firm of Chartered Certified Accountants, responsible for allocating staffto 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. Thecompany’s finance director, Peter, sees little value in the audit and put it out to tender last year as a cost-cuttingexercise. In accordance with the requirements of the invitation to tender your firm indicated that there would notbe an interim audit.(b) Huggins Co, a long-standing client, operates a national supermarket chain. Your firm provided Huggins Co withcorporate financial advice on obtaining a listing on a recognised stock exchange in 2005. Senior managementexpects a thorough examination of the company’s computerised systems, and are also seeking assurance thatthe 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. Grayprovides communication services and software solutions. Your firm provides Gray with technical advice onfinancial reporting and tax services. Most recently you have been asked to conduct due diligence reviews onpotential 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)
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, sincethe 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 completelynew range of wooden garden furniture. The directors have approached LCT Bank for the loan. The bank’s lendingcriteria stipulate the following:‘Loan applications must be accompanied by a detailed business plan, including an analysis of how the finance willbe used. LCT Bank need to see that the finance requested is adequate for the proposed business purpose. Thebusiness 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:$000Construction of new factory 1,250Purchase of new machinery 1,000Initial supply of timber raw material 250Advertising and marketing of new product 500Your firm has agreed to review the business plan and to provide an assurance opinion on the completeness of thefinance 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 meetingwith Mulligan Co. (8 marks)
5 You are the audit manager for three clients of Bertie Co, a firm of Chartered Certified Accountants. The financialyear end for each client is 30 September 2007.You are reviewing the audit senior’s proposed audit reports for two clients, Alpha Co and Deema Co.Alpha Co, a listed company, permanently closed several factories in May 2007, with all costs of closure finalised andpaid in August 2007. The factories all produced the same item, which contributed 10% of Alpha Co’s total revenuefor the year ended 30 September 2007 (2006 – 23%). The closure has been discussed accurately and fully in thechairman’s statement and Directors’ Report. However, the closure is not mentioned in the notes to the financialstatements, nor separately disclosed on the financial statements.The audit senior has proposed an unmodified audit opinion for Alpha Co as the matter has been fully addressed inthe chairman’s statement and Directors’ Report.In October 2007 a legal claim was filed against Deema Co, a retailer of toys. The claim is from a customer who slippedon a greasy step outside one of the retail outlets. The matter has been fully disclosed as a material contingent liabilityin the notes to the financial statements, and audit working papers provide sufficient evidence that no provision isnecessary as Deema Co’s lawyers have stated in writing that the likelihood of the claim succeeding is only possible.The amount of the claim is fixed and is adequately covered by cash resources.The audit senior proposes that the audit opinion for Deema Co should not be qualified, but that an emphasis of matterparagraph should be included after the audit opinion to highlight the situation.Hugh Co was incorporated in October 2006, using a bank loan for finance. Revenue for the first year of trading is$750,000, and there are hopes of rapid growth in the next few years. The business retails luxury hand made woodentoys, currently in a single retail outlet. The two directors (who also own all of the shares in Hugh Co) are aware thatdue to the small size of the company, the financial statements do not have to be subject to annual external audit, butthey are unsure whether there would be any benefit in a voluntary audit of the first year financial statements. Thedirectors are also aware that a review of the financial statements could be performed as an alternative to a full audit.Hugh Co currently employs a part-time, part-qualified accountant, Monty Parkes, who has prepared a year endbalance sheet and income statement, and who produces summary management accounts every three months.Required:(a) Evaluate whether the audit senior’s proposed audit report is appropriate, and where you disagree with theproposed report, recommend the amendment necessary to the audit report of:(i) Alpha Co; (6 marks)
4 You are a senior manager in Becker Co, a firm of Chartered Certified Accountants offering audit and assuranceservices mainly to large, privately owned companies. The firm has suffered from increased competition, due to twonew firms of accountants setting up in the same town. Several audit clients have moved to the new firms, leading toloss of revenue, and an over staffed audit department. Bob McEnroe, one of the partners of Becker Co, has askedyou to consider how the firm could react to this situation. Several possibilities have been raised for your consideration:1. Murray Co, a manufacturer of electronic equipment, is one of Becker Co’s audit clients. You are aware that thecompany has recently designed a new product, which market research indicates is likely to be very successful.The development of the product has been a huge drain on cash resources. The managing director of Murray Cohas written to the audit engagement partner to see if Becker Co would be interested in making an investmentin the new product. It has been suggested that Becker Co could provide finance for the completion of thedevelopment and the marketing of the product. The finance would be in the form. of convertible debentures.Alternatively, a joint venture company in which control is shared between Murray Co and Becker Co could beestablished to manufacture, market and distribute the new product.2. Becker Co is considering expanding the provision of non-audit services. Ingrid Sharapova, a senior manager inBecker Co, has suggested that the firm could offer a recruitment advisory service to clients, specialising in therecruitment of finance professionals. Becker Co would charge a fee for this service based on the salary of theemployee recruited. Ingrid Sharapova worked as a recruitment consultant for a year before deciding to train asan accountant.3. Several audit clients are experiencing staff shortages, and it has been suggested that temporary staff assignmentscould be offered. It is envisaged that a number of audit managers or seniors could be seconded to clients forperiods not exceeding six months, after which time they would return to Becker Co.Required:Identify and explain the ethical and practice management implications in respect of:(a) A business arrangement with Murray Co. (7 marks)
You are the manager responsible for performing hot reviews on audit files where there is a potential disagreementbetween your firm and the client regarding a material issue. You are reviewing the going concern section of the auditfile of Dexter Co, a client with considerable cash flow difficulties, and other, less significant operational indicators ofgoing concern problems. The working papers indicate that Dexter Co is currently trying to raise finance to fundoperating cash flows, and state that if the finance is not received, there is significant doubt over the going concernstatus of the company. The working papers conclude that the going concern assumption is appropriate, but it isrecommended that the financial statements should contain a note explaining the cash flow problems faced by thecompany, along with a description of the finance being sought, and an evaluation of the going concern status of thecompany. The directors do not wish to include the note in the financial statements.Required:(b) Consider and comment on the possible reasons why the directors of Dexter Co are reluctant to provide thenote to the financial statements. (5 marks)
(c) Maxwell Co is audited by Lead Co, a firm of Chartered Certified Accountants. Leo Sabat has enquired as towhether your firm would be prepared to conduct a joint audit in cooperation with Lead Co, on the futurefinancial statements of Maxwell Co if the acquisition goes ahead. Leo Sabat thinks that this would enable yourfirm to improve group audit efficiency, without losing the cumulative experience that Lead Co has built up whileacting as auditor to Maxwell Co.Required:Define ‘joint audit’, and assess the advantages and disadvantages of the audit of Maxwell Co being conductedon a ‘joint basis’. (7 marks)
You are an audit manager responsible for providing hot reviews on selected audit clients within your firm of CharteredCertified Accountants. You are currently reviewing the audit working papers for Pulp Co, a long standing audit client,for the year ended 31 January 2008. The draft statement of financial position (balance sheet) of Pulp Co shows totalassets of $12 million (2007 – $11·5 million).The audit senior has made the following comment in a summary ofissues for your review:‘Pulp Co’s statement of financial position (balance sheet) shows a receivable classified as a current asset with a valueof $25,000. The only audit evidence we have requested and obtained is a management representation stating thefollowing:(1) that the amount is owed to Pulp Co from Jarvis Co,(2) that Jarvis Co is controlled by Pulp Co’s chairman, Peter Sheffield, and(3) that the balance is likely to be received six months after Pulp Co’s year end.The receivable was also outstanding at the last year end when an identical management representation was provided,and our working papers noted that because the balance was immaterial no further work was considered necessary.No disclosure has been made in the financial statements regarding the balance. Jarvis Co is not audited by our firmand we have verified that Pulp Co does not own any shares in Jarvis Co.’Required:(b) In relation to the receivable recognised on the statement of financial position (balance sheet) of Pulp Co asat 31 January 2008:(i) Comment on the matters you should consider. (5 marks)
5 You are the manager responsible for the audit of Blod Co, a listed company, for the year ended 31 March 2008. Yourfirm was appointed as auditors of Blod Co in September 2007. The audit work has been completed, and you arereviewing the working papers in order to draft a report to those charged with governance. The statement of financialposition (balance sheet) shows total assets of $78 million (2007 – $66 million). The main business activity of BlodCo is the manufacture of farm machinery.During the audit of property, plant and equipment it was discovered that controls over capital expenditure transactionshad deteriorated during the year. Authorisation had not been gained for the purchase of office equipment with a costof $225,000. No material errors in the financial statements were revealed by audit procedures performed on property,plant and equipment.An internally generated brand name has been included in the statement of financial position (balance sheet) at a fairvalue of $10 million. Audit working papers show that the matter was discussed with the financial controller, whostated that the $10 million represents the present value of future cash flows estimated to be generated by the brandname. The member of the audit team who completed the work programme on intangible assets has noted that thistreatment appears to be in breach of IAS 38 Intangible Assets, and that the management refuses to derecognise theasset.Problems were experienced in the audit of inventories. Due to an oversight by the internal auditors of Blod Co, theexternal audit team did not receive a copy of inventory counting procedures prior to attending the count. This causeda delay at the beginning of the inventory count, when the audit team had to quickly familiarise themselves with theprocedures. In addition, on the final audit, when the audit senior requested documentation to support the finalinventory valuation, it took two weeks for the information to be received because the accountant who had preparedthe schedules had mislaid them.Required:(a) (i) Identify the main purpose of including ‘findings from the audit’ (management letter points) in a reportto those charged with governance. (2 marks)
Your firm has been recommended to us by DINOSOUR TOY CO,LTD()we have done business for many fears. A、whichB、with whomC、whomD、with which
Your IT director has decided to allow employees to use their laptops at home as well as in the office. You have deployed the Junos Pulse client to allow access to the offices 802.1X-enabled wired network. Your company also has the Junos Pulse Secure Access Service deployed. You want the Junos Pulse client to automatically launch the appropriate access method depending on each users location.Which three are supported to determine the users location?（）A. MAC addressB. DNS serverC. DHCP serverD. resolve addressE. endpoint address
(a) Contrast the role of internal and external auditors. (8 marks)(b) Conoy Co designs and manufactures luxury motor vehicles. The company employs 2,500 staff and consistently makes a net profit of between 10% and 15% of sales. Conoy Co is not listed; its shares are held by 15 individuals, most of them from the same family. The maximum shareholding is 15% of the share capital.The executive directors are drawn mainly from the shareholders. There are no non-executive directors because the company legislation in Conoy Co’s jurisdiction does not require any. The executive directors are very successful in running Conoy Co, partly from their training in production and management techniques, and partly from their ‘hands-on’ approach providing motivation to employees.The board are considering a significant expansion of the company. However, the company’s bankers areconcerned with the standard of financial reporting as the financial director (FD) has recently left Conoy Co. The board are delaying provision of additional financial information until a new FD is appointed.Conoy Co does have an internal audit department, although the chief internal auditor frequently comments that the board of Conoy Co do not understand his reports or provide sufficient support for his department or the internal control systems within Conoy Co. The board of Conoy Co concur with this view. Anders Co, the external auditors have also expressed concern in this area and the fact that the internal audit department focuses work on control systems, not financial reporting. Anders Co are appointed by and report to the board of Conoy Co.The board of Conoy Co are considering a proposal from the chief internal auditor to establish an audit committee.The committee would consist of one executive director, the chief internal auditor as well as three new appointees.One appointee would have a non-executive seat on the board of directors.Required:Discuss the benefits to Conoy Co of forming an audit committee. (12 marks)
One of your audit clients is Tye Co a company providing petrol, aviation fuel and similar oil based products to the government of the country it is based in. Although the company is not listed on any stock exchange, it does follow best practice regarding corporate governance regulations. The audit work for this year is complete, apart from the matter referred to below.As part of Tye Co’s service contract with the government, it is required to hold an emergency inventory reserve of 6,000 barrels of aviation fuel. The inventory is to be used if the supply of aviation fuel is interrupted due to unforeseen events such as natural disaster or terrorist activity.This fuel has in the past been valued at its cost price of $15 a barrel. The current value of aviation fuel is $120 a barrel. Although the audit work is complete, as noted above, the directors of Tye Co have now decided to show the ‘real’ value of this closing inventory in the financial statements by valuing closing inventory of fuel at market value, which does not comply with relevant accounting standards. The draft financial statements of Tye Co currently show a profit of approximately $500,000 with net assets of $170 million.Required:(a) List the audit procedures and actions that you should now take in respect of the above matter. (6 marks)(b) For the purposes of this section assume from part (a) that the directors have agreed to value inventory at$15/barrel.Having investigated the matter in part (a) above, the directors present you with an amended set of financialstatements showing the emergency reserve stated not at 6,000 barrels, but reported as 60,000 barrels. The final financial statements now show a profit following the inclusion of another 54,000 barrels of oil in inventory. When queried about the change from 6,000 to 60,000 barrels of inventory, the finance director stated that this change was made to meet expected amendments to emergency reserve requirements to be published in about six months time. The inventory will be purchased this year, and no liability will be shown in the financial statements for this future purchase. The finance director also pointed out that part of Tye Co’s contract with the government requires Tye Co to disclose an annual profit and that a review of bank loans is due in three months. Finally the finance director stated that if your audit firm qualifies the financial statements in respect of the increase in inventory, they will not be recommended for re-appointment at the annual general meeting. The finance director refuses to amend the financial statements to remove this ‘fictitious’ inventory.Required:(i) State the external auditor’s responsibilities regarding the detection of fraud; (4 marks)(ii) Discuss to which groups the auditors of Tye Co could report the ‘fictitious’ aviation fuel inventory;(6 marks)(iii) Discuss the safeguards that the auditors of Tye Co can use in an attempt to overcome the intimidationthreat from the directors of Tye Co. (4 marks)
JJG Co is planning to raise $15 million of new finance for a major expansion of existing business and is considering a rights issue, a placing or an issue of bonds. The corporate objectives of JJG Co, as stated in its Annual Report, are to maximise the wealth of its shareholders and to achieve continuous growth in earnings per share. Recent financial information on JJG Co is as follows:Required:(a) Evaluate the financial performance of JJG Co, and analyse and discuss the extent to which the company has achieved its stated corporate objectives of:(i) maximising the wealth of its shareholders;(ii) achieving continuous growth in earnings per share.Note: up to 7 marks are available for financial analysis.(12 marks)(b) If the new finance is raised via a rights issue at $7·50 per share and the major expansion of business hasnot yet begun, calculate and comment on the effect of the rights issue on:(i) the share price of JJG Co;(ii) the earnings per share of the company; and(iii) the debt/equity ratio. (6 marks)(c) Analyse and discuss the relative merits of a rights issue, a placing and an issue of bonds as ways of raising the finance for the expansion. (7 marks)
You are the audit supervisor of Maple Co and are currently planning the audit of an existing client, Sycamore Science Co (Sycamore), whose year end was 30 April 2015. Sycamore is a pharmaceutical company, which manufactures and supplies a wide range of medical supplies. The draft financial statements show revenue of $35·6 million and profit before tax of $5·9 million.Sycamore’s previous finance director left the company in December 2014 after it was discovered that he had been claiming fraudulent expenses from the company for a significant period of time. A new finance director was appointed in January 2015 who was previously a financial controller of a bank, and she has expressed surprise that Maple Co had not uncovered the fraud during last year’s audit.During the year Sycamore has spent $1·8 million on developing several new products. These projects are at different stages of development and the draft financial statements show the full amount of $1·8 million within intangible assets. In order to fund this development, $2·0 million was borrowed from the bank and is due for repayment over a ten-year period. The bank has attached minimum profit targets as part of the loan covenants.The new finance director has informed the audit partner that since the year end there has been an increased number of sales returns and that in the month of May over $0·5 million of goods sold in April were returned.Maple Co attended the year-end inventory count at Sycamore’s warehouse. The auditor present raised concerns that during the count there were movements of goods in and out the warehouse and this process did not seem well controlled.During the year, a review of plant and equipment in the factory was undertaken and surplus plant was sold, resulting in a profit on disposal of $210,000.Required:(a) State Maples Co’s responsibilities in relation to the prevention and detection of fraud and error. (4 marks)(b) Describe SIX audit risks, and explain the auditor’s response to each risk, in planning the audit of Sycamore Science Co. (12 marks)(c) Sycamore’s new finance director has read about review engagements and is interested in the possibility of Maple Co undertaking these in the future. However, she is unsure how these engagements differ from an external audit and how much assurance would be gained from this type of engagement.Required:(i) Explain the purpose of review engagements and how these differ from external audits; and (2 marks)(ii) Describe the level of assurance provided by external audits and review engagements. (2 marks)
Moonstar Co is a property development company which is planning to undertake a $200 million commercial property development. Moonstar Co has had some difficulties over the last few years, with some developments not generating the expected returns and the company has at times struggled to pay its finance costs. As a result Moonstar Co’s credit rating has been lowered, affecting the terms it can obtain for bank finance. Although Moonstar Co is listed on its local stock exchange, 75% of the share capital is held by members of the family who founded the company. The family members who are shareholders do not wish to subscribe for a rights issue and are unwilling to dilute their control over the company by authorising a new issue of equity shares. Moonstar Co’s board is therefore considering other methods of financing the development, which the directors believe will generate higher returns than other recent investments, as the country where Moonstar Co is based appears to be emerging from recession.Securitisation proposalsOne of the non-executive directors of Moonstar Co has proposed that it should raise funds by means of a securitisation process, transferring the rights to the rental income from the commercial property development to a special purpose vehicle. Her proposals assume that the leases will generate an income of 11% per annum to Moonstar Co over a ten-year period. She proposes that Moonstar Co should use 90% of the value of the investment for a collateralised loan obligation which should be structured as follows:– 60% of the collateral value to support a tranche of A-rated floating rate loan notes offering investors LIBOR plus 150 basis points– 15% of the collateral value to support a tranche of B-rated fixed rate loan notes offering investors 12%– 15% of the collateral value to support a tranche of C-rated fixed rate loan notes offering investors 13%– 10% of the collateral value to support a tranche as subordinated certificates, with the return being the excess of receipts over payments from the securitisation processThe non-executive director believes that there will be sufficient demand for all tranches of the loan notes from investors. Investors will expect that the income stream from the development to be low risk, as they will expect the property market to improve with the recession coming to an end and enough potential lessees to be attracted by the new development.The non-executive director predicts that there would be annual costs of $200,000 in administering the loan. She acknowledges that there would be interest rate risks associated with the proposal, and proposes a fixed for variable interest rate swap on the A-rated floating rate notes, exchanging LIBOR for 9·5%.However the finance director believes that the prediction of the income from the development that the non-executive director has made is over-optimistic. He believes that it is most likely that the total value of the rental income will be 5% lower than the non-executive director has forecast. He believes that there is some risk that the returns could be so low as to jeopardise the income for the C-rated fixed rate loan note holders.Islamic financeMoonstar Co’s chief executive has wondered whether Sukuk finance would be a better way of funding the development than the securitisation.Moonstar Co’s chairman has pointed out that a major bank in the country where Moonstar Co is located has begun to offer a range of Islamic financial products. The chairman has suggested that a Mudaraba contract would be the most appropriate method of providing the funds required for the investment.Required:(a) Calculate the amounts in $ which each of the tranches can expect to receive from the securitisation arrangement proposed by the non-executive director and discuss how the variability in rental income affects the returns from the securitisation. (11 marks)(b) Discuss the benefits and risks for Moonstar Co associated with the securitisation arrangement that the non-executive director has proposed. (6 marks)(c) (i) Discuss the suitability of Sukuk finance to fund the investment, including an assessment of its appeal to potential investors. (4 marks)(ii) Discuss whether a Mudaraba contract would be an appropriate method of financing the investment and discuss why the bank may have concerns about providing finance by this method. (4 marks)
You are an audit manager at Rockwell Co, a firm of Chartered Certified Accountants. You are responsible for the audit of the Hopper Group, a listed audit client which supplies ingredients to the food and beverage industry worldwide.The audit work for the year ended 30 June 2015 is nearly complete, and you are reviewing the draft audit report which has been prepared by the audit senior. During the year the Hopper Group purchased a new subsidiary company, Seurat Sweeteners Co, which has expertise in the research and design of sugar alternatives. The draft financial statements of the Hopper Group for the year ended 30 June 2015 recognise profit before tax of $495 million (2014 – $462 million) and total assets of $4,617 million (2014: $4,751 million). An extract from the draft audit report is shown below:Basis of modified opinion (extract)In their calculation of goodwill on the acquisition of the new subsidiary, the directors have failed to recognise consideration which is contingent upon meeting certain development targets. The directors believe that it is unlikely that these targets will be met by the subsidiary company and, therefore, have not recorded the contingent consideration in the cost of the acquisition. They have disclosed this contingent liability fully in the notes to the financial statements. We do not feel that the directors’ treatment of the contingent consideration is correct and, therefore, do not believe that the criteria of the relevant standard have been met. If this is the case, it would be appropriate to adjust the goodwill balance in the statement of financial position.We believe that any required adjustment may materially affect the goodwill balance in the statement of financial position. Therefore, in our opinion, the financial statements do not give a true and fair view of the financial position of the Hopper Group and of the Hopper Group’s financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.Emphasis of Matter ParagraphWe draw attention to the note to the financial statements which describes the uncertainty relating to the contingent consideration described above. The note provides further information necessary to understand the potential implications of the contingency.Required:(a) Critically appraise the draft audit report of the Hopper Group for the year ended 30 June 2015, prepared by the audit senior.Note: You are NOT required to re-draft the extracts from the audit report. (10 marks)(b) The audit of the new subsidiary, Seurat Sweeteners Co, was performed by a different firm of auditors, Fish Associates. During your review of the communication from Fish Associates, you note that they were unable to obtain sufficient appropriate evidence with regard to the breakdown of research expenses. The total of research costs expensed by Seurat Sweeteners Co during the year was $1·2 million. Fish Associates has issued a qualified audit opinion on the financial statements of Seurat Sweeteners Co due to this inability to obtain sufficient appropriate evidence.Required:Comment on the actions which Rockwell Co should take as the auditor of the Hopper Group, and the implications for the auditor’s report on the Hopper Group financial statements. (6 marks)(c) Discuss the quality control procedures which should be carried out by Rockwell Co prior to the audit report on the Hopper Group being issued. (4 marks)
You are the audit manager of Chestnut Co and are reviewing the key issues identified in the files of two audit clients.Palm Industries Co (Palm)Palm’s year end was 31 March 2015 and the draft financial statements show revenue of $28·2 million, receivables of $5·6 million and profit before tax of $4·8 million. The fieldwork stage for this audit has been completed.A customer of Palm owed an amount of $350,000 at the year end. Testing of receivables in April highlighted that no amounts had been paid to Palm from this customer as they were disputing the quality of certain goods received from Palm. The finance director is confident the issue will be resolved and no allowance for receivables was made with regards to this balance.Ash Trading Co (Ash)Ash is a new client of Chestnut Co, its year end was 31 January 2015 and the firm was only appointed auditors in February 2015, as the previous auditors were suddenly unable to undertake the audit. The fieldwork stage for this audit is currently ongoing.The inventory count at Ash’s warehouse was undertaken on 31 January 2015 and was overseen by the company’s internal audit department. Neither Chestnut Co nor the previous auditors attended the count. Detailed inventory records were maintained but it was not possible to undertake another full inventory count subsequent to the year end.The draft financial statements show a profit before tax of $2·4 million, revenue of $10·1 million and inventory of $510,000.Required:For each of the two issues:(i) Discuss the issue, including an assessment of whether it is material;(ii) Recommend ONE procedure the audit team should undertake to try to resolve the issue; and(iii) Describe the impact on the audit report if the issue remains UNRESOLVED.Notes:1 The total marks will be split equally between each of the two issues.2 Audit report extracts are NOT required.
Your firm has been recommended to us by AMK company, （） we have done business for many years.Awith whomBwith whoCwhomDwho
Your firm has been recommended to us by AMK company, （） we have done business for many years.A、with whomB、with whoC、whomD、who
Your IT director has decided to allow employees to use their laptops at home as well as in the office. You have deployed the Junos Pulse client to allow access to the offices 802.1X-enabled wired network. Your company also has the Junos Pulse Secure Access Service deployed. You want the Junos Pulse client to automatically launch the appropriate access method depending on each users location. Which three are supported to determine the users location?（）A、MAC addressB、DNS serverC、DHCP serverD、resolve addressE、endpoint address
You work as an Exchange Administrator for TechWorld Inc.The company has a Windows 2008 Active Directory-based contains an Exchange Server 2010 organization.The CIO has requested you to ensure that all emails with JPEG at that they are not allowed into the users’ mailboxes.You decide to use the Exchange Management Shell.Which of t you use to accomplish the task？（）A、Add-AttachmentFilterEntry -Name image/jpeg -Type FileNameB、Add-AttachmentFilterEntry -Name *.exe -Type FileNameC、Add-AttachmentFilterEntry -Name image/jpeg -Type ContentTypeD、Add-AttachmentFilterEntry -Name ".jpeg -Type ContentType
You work as an Exchange Administrator for Xxx Inc.The company has a Windows 2008 Active Directorybased network.The network contains an Exchange Server 2010 organization.The CIO has requested you to ensure that all emails with JPEG attachments be filtered so that they are not allowed into the users’ mailboxes.You decide to use the Exchange Management Shell.Which of the following commands will you use to accomplish the task？（）A、Add-AttachmentFilterEntry -Name *.jpeg -Type ContentTypeB、Add-AttachmentFilterEntry -Name *.exe -Type FileNameC、Add-AttachmentFilterEntry -Name image/jpeg -Type ContentTypeD、Add-AttachmentFilterEntry -Name image/jpeg -Type FileName
单选题Your firm has been recommended to us by AMK company, （） we have done business for many years.Awith whomBwith whoCwhomDwho