just fill the lines and just answer question 1 and five thats all
Examination Cover Page Examination Period: 2016 Term 3 Academic Institution: Central Queensland University Academic Group: Higher Education Division Academic Career: Postgraduate Examination Type: Standard AFFIX STUDENT ID STICKER HERE I have read and understood the penalties involved if I do not abide by the rules outlined on the back of this examination paper. Student Signature: Student ID Number Unit: Auditing and Ethics Subject Area: ACCT Catalog Number: 20075 Paper Number: 1 Component: ALL Components Duration: 180 minutes Restrictions: Closed Book Perusal Time: 15 minutes First Contact: Sally Chaplin Contact Number: 07 3023 4236 Second Contact: Ann Sardesai Contact Number: 02 9324 5752 Office Use: Release examination paper via the CQ University Past Exams website two weeks after the DE/SE examination period? Yes Instructor Authorised/Allowed Materials Dictionary - non-electronic, concise, direct translation only (dictionary must not contain any notes or comments). Calculator - non-programmable, no text retrieval, silent only. Student Calculator - Make:____________________ / Model: ____________________ Special Instructions to Students: Please see instruction sheet on first page of the examination paper. Examination Office Supplied Materials 1 x Rough Paper QUESTIONS ANSWERED MARKS QUESTIONS ANSWERED MARKS Number of examination answer booklets used: Number of separate sheets attached (Do not include rough paper): This examination paper is not to be released to the student at the conclusion of the examination. Central Queensland University considers improper conduct in examinations to be a serious offence. Penalties for cheating are exclusion from the University and cancellation with academic penalty from the unit concerned. Term 3 Standard Examination 2016 Auditing and Ethics — ACCT20075 Page 1 of 8 Instructions Sheet 1. Write all answers in the spaces provided on this examination paper. 2. This examination paper comprises five (5) questions. 3. Marks for each question are as indicated. This examination is marked out of 60 marks. 4. Length of answers are guided by the space provided on this examination paper. Please write within the space provided. Term 3 Standard Examination 2016 Auditing and Ethics — ACCT20075 Page 2 of 8 TOTAL 60 MARKS Question 1 – Planning the Audit 12 Marks Part A (6 marks) Manuke has drafted an audit plan for a new client. The client is Marquee Starshine, a party-hire business. Marquee Starshine earns 80 per cent of its revenue from hiring marquees, tables and chairs, lights and other party equipment and 20 per cent from sales of disposable crockery, cutlery, napkins and table cloths. Manuke’s plan shows that audit time is divided to reflect this revenue pattern (that is, 80 per cent of the audit time is spent on the hire business and 20 per cent of the time is spent on the retail business). Manuke believes that the significance of the revenue activities should be the only driver of the audit plan because the client has no related parties and a simple, effective corporate governance structure. Required List three (3) questions that you would ask Manuke before accepting his audit plan? a) ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ (2 marks) b) ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ (2 marks) c) ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ (2 marks) Question 1 continued next page Term 3 Standard Examination 2016 Auditing and Ethics — ACCT20075 Page 3 of 8 Question 1 continued Part B (6 marks) Preliminary analytical procedures are performed as part of the planning process to assist the auditor in gaining an understanding of the entity and its environment (ASA 315 ‘Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment’). Required: From the three rows of data shown below for Georgie Manufacturing Pty Ltd: (a) what conclusions would you draw from the ratio analysis (i.e. interpret any movement in the ratio and discuss the audit risks that could be present); and (b) what areas would you then emphasise in conducting the audit in relation to the risks identified in your conclusions. Millicent Manufacturing Pty Ltd 2016 2015 2014 2013 Industry 2016 1. Inventory Turnover 3.40 3.21 4.66 5.64 4.88 2. Current Ratio 1.65 1.69 2.08 2.31 2.00 3. Days Sales in Receivables 99 86 90 62 60 Question 1 Part B continued next page Term 3 Standard Examination 2016 Auditing and Ethics — ACCT20075 Page 4 of 8 Question 1 Part B continued a) Inventory Turnover Conclusions: _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ Audit Emphasis: _____________________________________________________________________ _____________________________________________________________________ (2 marks) b) Current Ratio Conclusions: _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ Audit Emphasis: _____________________________________________________________________ _____________________________________________________________________ (2 marks) c) Days Sales in Receivables Conclusions: _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ Audit Emphasis: _____________________________________________________________________ _____________________________________________________________________ (2 marks) Term 3 Standard Examination 2016 Auditing and Ethics — ACCT20075 Page 5 of 8 Question 2 – Professional Ethics 12 Marks Charles is at a neighbourhood Christmas party with several of his flatmates. Over a few beers, Charles gets into a conversation with a neighbour, William, about mutual acquaintances. Charles is a senior auditor with a large accounting firm (although he tells William that he is a partner at the firm) and William works for a large bank. During the conversation Charles and William discover that they have both had professional dealings with a particular family-owned manufacturing company. William reveals that the company’s line of credit is about to be cancelled because of some irregularities with the security. Charles is concerned to hear this news because he has just participated in the company’s financial report audit and there was no indication of any problems with its borrowings. However, as Charles explains to William, he has his doubts about the patriarch of the family, whom Charles believes is having an affair with his personal assistant. Charles also tells William that the family has quietly increased its shareholdings in a listed company that supplies components to the family manufacturing company. The components manufacturing company is about to announce to the share market that it has just won a very large, and very profitable, contract with a Chinese company. Required (a) All members of the professional accounting bodies are to comply with the fundamental ethical principles (APES 110, s.100.4). List the five fundamental principles of professional ethics. _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ (5 marks) (b) Discuss the ethical principles that are potentially breached by Charles’s behaviour at the party and explain how the principles are breached. _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ (7 marks) Term 3 Standard Examination 2016 Auditing and Ethics — ACCT20075 Page 6 of 8 Question 3 – Internal Controls 12 Marks Documentation of internal controls assists the auditor because the process of preparing the documentation prompts the auditor to ask detailed questions in order to gain a full understanding. An experienced auditor would be able to identify departures from the systems generally used in organisations. There are four common approaches to internal control documentation. Required List four approaches to internal control documentation and assess the advantages and disadvantages of each. 1.____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ (3 marks) 2.____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ (3 marks) 3.____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ (3 marks) 4.____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ (3 marks) Term 3 Standard Examination 2016 Auditing and Ethics — ACCT20075 Page 7 of 8 Question 4 – Testing 12 Marks Your firm is auditing Samson Ltd, a large manufacturer of steel products. You have been assigned the audit of property, plant and equipment (PPE) for the year-ended 30 June 2016. Samson Ltd maintains a computerised fixed assets register. The company has three main classes of PPE: (1) Freehold Land & Buildings, (2) Manufacturing Machinery, Plant & Equipment, and (3) Motor Vehicles. You are concerned that the depreciation rates for Motor Vehicles may be inadequate. You are also concerned that the recent revaluation of Freehold Land and Buildings by 20% is too high in the current economic climate. Required: For each management assertion listed in the table below, provide substantive audit procedures in relation to one of the above PPE accounts that