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Hi Kim,
I have seen OT lecture videos and lecture notes however there is one thing that is abit ambiguous.
For PFI procedures, i am also able to write “review copy of bank statement to confirm….” “recalculate the finance cost …..” ???
But main thing is to primarily focus on analytical procedures and discussion with management/TCWG, however what if there’s no prospective financial information to perform AP and discssion, theen procedures of PFI is similar to just normal PFI (Question December 2018) ?
THank you Kim
I don’t really know what you are asking – prospective means FUTURE – you can’t review anything that will only be available in the future. You can compare an interest rate used in a projection/forecast with a current interest rate and reperform calculations/casts in the PFI – but you can’t audit it as if it is historic financial information.
In D18 Q2(b) – you’re not given it but you know it’s a cash flow forecast – so you have to tailor your answer to that by thinking about, in the context of Daley – what would be the cash outflows? and inflows? what would be monthly cash flows? what might be the “one-offs”. Looking at all the notes there are clear pointers – so the answer must be tailored to use this information.
in the D18 Q2(b), in the notes, it says the finance director expects to take out a matching facility with the current lender to pay off the existing debt. Then can i say for the audit procedures
” Review the copy of board minutes to confirm the approval of taking out matching facility in order to pay off existing debt ” ???
moreover if in PFI question, if it says a company has received a loan, then can i say in the audit procedure as
“review the copy of bank statement to confirm the $XX loan was received “
If you mean Rope Co it is from S/D16. The Q says “The FD expects to … ” – do something in more than two years time – I doubt the board has yet approved this as a course of action – and even if it has – it would be the lender’s approval that is relevant (not management’s).
I cannot say whether specific answer points will be relevant or not – it depends on the Q. But my gut feel is that the answer is no – if it’s a future cash flow you can’t find it on a historic bank statements – if it’s in a historic bank statement it won’t be in a cash flow forecast. What may be relevant would be to agree the terms of a current bank loan to confirm its expiry/repayment schedule/interest payments, etc.
Hi then how about the below evidence for the same question (S/D16)
1. like reviewing past sales report for the past (e.g 5 years ) to confirm whether the increasing trend of sales forecast is reasonable and apropriate
and
2. in the third notes, it says finance director expects to take out a matching facility …..etc, Then can i write as “Copy of board minutes to confirm the approval of taking out matching facility to pay off existing debt” ? because finance director expect means at least there was an approval by the board right ?
1. is ok – i.e. use recent trend to support assumption about future trend.
2. I don’t you can take FD’s expectation means board approval – and even if course of action is approved by the board it doesn’t validate what is a significant assumption (that the LENDER will agree to this).for number 2, may i know what you mean by “doesn’t validate what is a significant assumption that the lender will agree to this” ?
The reason i take FD’s expectations as a board approval is because FD won’t expect without board approval for loan ?may i ask if the below answers are acceptable answers for the same question ? (S/D 2016)
3. Notes of discussion whether receipt from customers & payment to suppliers include the inflation rate and if not on what basis they were not included
4. Results of external sources (e.g bloomberg, yahoo finance) to confirm the general inflation rate of 2% is reasonable and appropriate
5. copy of correspondence between the Rope Co and bankers to confirm the on-going negotiation of debt, amount(i.e 1.5m) and feasible terms and conditions
6. Notes of discussion why 0.5m was included when the fair value was 0.35m and how they will finance the loan amount if the fair value is lesser than .5m
7. Copy of loan document to confirm the amount, repayment date, terms and conditions of loanRe 2. You are assuming that the FD’s expectation is based on board approval. I am saying that a successful outcome on the renegotiation of the loan is an assumption (as stated in the answer). Even if the board has approved that it will seek to renew the loan (and I don’t think this is likely) – it is the lender how has to approve the giving of the loan.
I am sorry but I cannot provide guide commentary/marking service on suggestions of answer points. The published answer is comprehensive. As long as your points are on similar lines (they don’t have to be exactly the same) they will earn marks.
As a matter of interest – have you attempted the Qs and read the related marking article that I have flagged in the “sticky” post at the top of this forum? I recommend this to you.
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