Professional morks will be awarded for the demonstration of skill in analysis and evaluation, and professional scepticism and judgement in your answer. (© marks) (Total = 25 marks) 6 Smith & Co (P7 June 2008) (amended) 49 mins You are an audit manager in Smith & Co, a firm of Chartered Certified Accountants. You have recently been made responsible for reviewing invoices roised to clients and for monitoring your firm's credit control procedures. Several matters came to light during your most recent review of client invoice files. In addition, some issues have arisen in relation an assurance client of the firm, Sci-Tech Co. The following exhibits, available on the left-hand side of the screen, provide information relevont to the question: 1 Details of client invoice review of Norman Co. 2 Details of client invoice review of Wallace Co. 3° Details of assurance client, Sci-Tech Co ‘This information should be used to answer the question requirements within the response options provided Exhibit 1: Norman Co, « large private company, hos not paid an invoice from Smith & Co doted § June 20X7 for work in respect of the financial statement audit for the year ended 28 February 20X7. A file note doted 30 November 20X7 states that Norman Co is suffering poor cash flows and is unable to pay the balance. This is the only piece of information in the file you ore reviewing reloting to the invoice. You ore aware that the final cudit work for the year ended 28 February 20X8, which has not yet been invoiced, is nearly complete ond the auditor's report is due to be issued imminently. Exhibit 2: Wollace Co, 0 private company whose business is the manufacture of industriol machinery, has poid all invoices relating to the recently completed audit planning for the year ended 31 Moy 20X8. However, in the invoice file you notice an invoice received by your firm from Wallace Co. The invoice is addressed to Valerie Hobson, the manager responsible for the aucit of Wallace Co. The invoice relates to the rental of on area in Wallace Co's empty warehouse, with the following comment handwritten on the invoice: ‘rental space being used for storage of Ms Hobson's speedboat for six months ~ she is our auditor, so only charge a nominal sum of S100". When ‘asked about the invoice, Valerie Hobson said that the invoice should have been sent to her private address. You are aware thet Wallace Co sometimes uses the empty warehouse for rental income, though this is not the main trading income of the company, Exhibit 3: Another client, Sci-Tech Co, is ¢ pharmaceutical research company. Your firm is engaged to provide an assurance conclusion on some key performance indicators (KPIs) that it discloses in its ‘operating and financial review. Sci-Tech Co receives funding from governmental health deportments, os well os several large charitable donations, the amount of which depends whether three KPI targets are met annually. All three of the targets must be met in order to secure the government funding. Comer Parad rete orsocd Pharmaceutical products donated free of charge to health care charities: 1% revenue 1% revenue 1.2% revenue PP Lege Questions 9poner Picard Perse Donations to, and cost of involvement with, local community charities: 0.5% revenue 0.6% revenue 0.8% revenue Accidents in the work place: Fewer than 5 serious accidents per year _| 4 serious accidents 2 serious accidents Required Using the information contained in Exhibits 1 and 2: Identify and discuss the ethical and other professional issues raised by the invoice file review, and recommend what action, if any, Smith & Co should now take in respect of: (©) Norman Co (7 marks) (©) Wallace Co © marks) Using the information contained in Exhibit 3: (© @__ Discuss why it may not be possible to provide a high level of assurance over the stoted key performance indicators. (i) Describe the procedures to verify the number of serious accidents in the year ended ‘30 November 20X7. (@ marks) Professional marks will be awarded for the demonstration of skill in enalysis end evaluation, professional scepticism and judgement and commercial acumen in your answer. ( marks) (Total = 25 marks) 7 Vizsla (P7 Mar/Jun 2018) (amended) 49 mins You are an audit manager in Pointer & Co, a firm of Chartered Certified Accountants which offers «a range of assurance services. You are responsible for the audit of Vizsla Co, o company which provides approximately 10% of your firm's practice income each year. The following exhibits provide information relevant to the question: 1 Anextract of an email from the finance director of Vizsla Co 2 Information regarding o review of prospective financial information for Vizsla Co This information should be used to answer the question requirements within the response option provided. Exhibit 1: The finance director of Vizsla Co has recently contacted you to provide information about ‘nother company, Setter Co, which is looking to appoint a provider of assurance services. An extract from the email which the finance director of Vizsla Co has sent to you is shown below: “One of my friends, Gordon Potts is the managing director of Setter Co, « small company which is looking to expand in the next few years. | know that Gordon has approached the company's bbank for finance of $6 million to fund the expansion. To support this loan application, Gordon needs to oppoint a firm to provide a limited assurance review on the company's financial statements. He would also want the appointed firm to provide tax planning advice and to prepare both the compony's and his personal tax computations for submission to the tox authorities. I have asked Gordon to contact you, and | hope that Pointer & Co will be able to provide these services to Setter Co for a low fee. Ifthe fee you suggest is too high, and unacceptable to Gordon, then | will recommend that Gordon approaches Griffon & Co instead, ond I would also Ccensider appointing Griffon & Co to provide the audit of Vizsla Co. Griffon & Co isa firm of Chartered Certified Accountants which has on office in the same town os Pointer & Co. BPP 40 Advonced Audit and Assurance ~ International (AAA ~ INT)