[adil1111]

Required:
(i) Evaluate the client’s accounting treatments and the difficulties which you might encounter when auditing
each of the accounting estimates described above; and
(ii) Design the audit procedures which should now be performed to gather sufficient and appropriate audit
evidence.

(ii) Regulatory penalties
Awdry Co has been subject to a review by the national railways regulator following a complaint from a member of staff with safety concerns. The regulator identified breaches in safety regulations and issued a penalty notice on 30 September 20X8. Awdry Co has appealed against the initial penalty payable. Negotiations with the regulator are still ongoing and the amount payable has not yet been finalised. Awdry Co currently
estimates that the total penalty payable as a result of the breach will be $1·3 million which it expects to repay in equal annual instalments over the next ten years with the first payment falling due on 1 March 20X9. The company’s draft statement of profit or loss for the current year recognises an expense of $1·3 million and the draft statement of financial position includes a liability for the same amount.

Please share your answers what your wrote??

[adil1111]

@lefteris said:
Q1
Biz risk (12m)
Risk of Material Misstatement (18m)
Ethical threat (6m) – advice on new payroll system, audit com ask for lower audit fees
Related Party Transaction (10m) – Difficulties to identify, Audit procedures on Related Party txn

Q2
Critically appraise audit report (10m)
Report to TCG (15m)
-PPE revaluation
-Capitalisation of renovation
-Audit partner rotation

Q3
ED-540 (8m)
Assess acct treatment and difficulty & Audit procedures (17m)
-Cash Based SBP (6m)
-Fine+IAS10 (6m)
-Capitalization of cost regarding development (5m)

Please enlighten me what partner rotation has to do with issues reported to those charged with governance?? Would you report partner rotation to those charged with governance?? Shed some light please?

[adil1111]

@ryanrocke said:
I think there’s a risk that Bronte moved from an investment to an associate through the increased shareholding and it may not have been adjusted and then equity accounted for.
I supported my claim by the fact that the parent appointed one of their directors to Bronte’s board.

The appointment of director was temporary for 3 months only, what say? Does it give significant influence on the company?

[adil1111]

Any one remembers what were the three cases in Q2 b??

[adil1111]

@hits123 said:
RoMM Q – did anyone mention anything in regards to the intangible asset (broadcasting license) not being amortised based on it being renewed indefinitely? They should have amortised over the 5 years irrespective of whether it was renewed indefinitely as even in this case intangible assets should be reviewed annually for impairment? I think it was material to the FS also.

Intangibles assets should be reviewed when there are indications of impairment not annually, says standard!!

[adil1111]

@walldlao said:
For the ethics part i think they cant provide the non audit service as they are listed company, besidea design and implementation of the system is the presuming management responsibility

Why the related party transactions are hard to discover?

Becoz they are not self evident, always conceal by the employee and they are always not under arms length transaction, meaning lower price than at normal cause of business

I wrote same.

[adil1111]

@dennis98 said:
no worries. is it true to say for a groups question (question 1) there was almost nothing to say that was groups related ? except to confirm that Bronte is not an associate, to confirm that they have 18% but dont have significant influence

Bronte was not an associate and was measured at cost, however as per IFRS9 it should be valued at FV at the reporting date. Any one has any disagreement please discuss?

[adil1111]

@dennis98 said:
Any thoughts on the cash settled share based payment one?

Should be valued at the fair value at the reporting date. Can you tell me what was the complete question requirement so that I can recall the answer?

[adil1111]

@dennis98 said:
business risks-

losing mkt share
losing customers
margin down
revenue down ( multiplying the 10 month figures by 6/5)
ebitda down
big fine probable 20 million (25% of total assets)
exec director gone to bronte for 3 months so skills loss
guaranteeing bronte’s loan which could cost them
failure of bronte’s technology development

any more?
are those correct?

Absolutely correct

[adil1111]

@dennis98 said:
For the building I just said you cant revalue it as an investment property before the conversion happens. you can only revalue it in the current period based on its current use. I didnt consider the project at all or do any calculation with the figures as they were not relevant to the current period. For procedures i said – confirm that a gain has not been posted to the P/L as this would overstate profit. Is this wrong?

Would you mind discussing part 1 and 2? I am interested in your views?

[adil1111]

@dennis98 said:
The part in question 3 about the fine which was appealed by the client for which the first payment was due on the first day after the year end- is events after the reporting period relevant here or just provisions?

You should have reviewed correspondence with the lawyers to confirm the amount of fine that would be payable.

[adil1111]

@dennis98 said:
The part in question 3 about the fine which was appealed by the client for which the first payment was due on the first day after the year end- is events after the reporting period relevant here or just provisions?

Only provision was relevant for fine of 1.3 million.

[adil1111]

I guess majority has left part 3 of Q3, majority has authority, examiner will be lineint.

[adil1111]

Did anyone used business risk related with the diargrams? The company was losing market share, can any one pick?

In critical appraisal, MURGC was given correctly but it was not mentioned which notes to the financial statements give the details about it.

Other Matter paragraph was actually a KAM however it was missing how the auditor addressed the matter.

In Question one there were two ethical threats in requirement C, Self review and management Threat and two actions were that being a listed company no safeguards can reduce the management threat and hence its forbidden. Second action was company should politely decline the engagement.

Related Party procedures were
Send a confirmation letter to the company to confirm the amount of 135000 payable to the company.
Agree the disclosure of Related party and transaction amount to the financial statement.

Question 3 was estimates and procedures I cant remember the text of question if someone shares I will share my answers.

Anyone who agrees with my treatments please mention here. You can also criticize lets see how much good we have done.

[adil1111]

I did the same way though didnnt mention about adverse opinion. All were qualified except for

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