[granal03]

AAA sat in centre – International Version
Q1 – Basically pets at home
A) Business risk 8 marks
B) RoMM 18 Marks
C) Outsource Credit Control team 7 marks
D) Audit Procedures on Holiday Pay 7 marks

Q2 – Completion Matters
A – Leases 9 marks
Inventory – 7 marks
B – audit opinion implication if Lease not corrected 4 marks

Q3 – Non audit service and Assurance
A) Engagement considerations 10 marks
B) Capital Expenditure examination procedures 10 marks

Tough exam, especially C if you don’t do that line of work.

First question tricky as industry was quite niche but hopefully the 20 professional marks up for grabs will help !

[granal03]

So trying to remember the exam – please correct me if I’m wrong

Section A – Theme Park industry, potential money laundering issues.
1 – 24 marks on Risk of Material Misstatement
2 – 6 marks on procedures around impairment of an asset
3 – 8 marks on money laundering (a lot were quite obvious in the text around the Sons upping revenue)
4 – 8 marks evaluating Meadow Co, a similar company, audit engagement assessment. Was quite difficult as not much info given beyond a basic check list

Section B
2 – 16 mark question on enquiries specifically around intangible assets and financing in a textile company – found this very difficult as not much info given to match up to 16 marks.
2b – 9 mark question on audit evidence in regards to the financing

3 – ai) – question on fieldwork undertaken by the audit team, specifically in regards to intangible assets for a smart vacuum – tricky question
Ii) was around the audit evidence you would expect in relation to the above (or procedures cant remember)
3b – 9 mark question on ethics with an FD as we go to get an audit with a company we have provided non audit services for. More straight forward.

Overall i think this was a tough exam, mainly because the industry’s were niche (textiles, theme parks, smart tech), there weren’t clear signposts for bits of the answer especially in section A there was alot of content to think about and then Section B was okay if you knew alot about intangibles, if not I think you struggle here. Confusing financial information too, so materiality wasn’t as simple. Going to be a very close pass if I get it.

[granal03]

Q1 – 10 marks for identifying business risks in a Pharmaceutical industry. Possibly 8 marks here for identifying one from each of Financial, Compliance, operational and strategic risks from the info.
20 marks for Risk of Material Misstatement, which in theory could be anything to do with financial statements or our audit of them. Lots of info here, there was R&D, legal cases, loans, going concern risk, project investment, impairment, fair value etc
8 marks on audit procedures to do with R&D of project. I used Analytical, Enquiry, Inspection, Observation and Recalculation detail.
8 marks on ethics on long term associated audit firm and the advantages and disadvantages. Mainly threats of familiarity and self review. Advantages are reduction in cost, understanding of niche areas/expertise, disadvantages are cost, understanding new audit client, competition etc.

Q2 was weird – audit completion questions on a manufacturing and packaging supplier. Part1 around due diligence and whether the review could be undertaken by your firm and any matters to be considered – mainly around competence, deadlines, independence, oversight, ISQC1, arms length etc l.
Questions on enquiry’s to be be considered in relation to performing the due diligence review – this was tricky against the management accounts but generally I went with supply chain risks, ethics, related party transactions, conflicts of interest, shareholding’s etc.
Last section lf Q2 was on other matters relating to the second warehouse, this seemed to be asking what info you would request to assess the issues. I went with checking planning permission, checking loan requirements and lease etc
3 was ISA701 KAM so if you knew that well done because I didn’t. Essentially review risk of material misstatement and significant audit risk – so first two (inventory valuation and control) were KAM, management judgement is a key one. Last one isnt a conflict as there is no engagement.
Second part of question was on subsidiary consolidation which again was a bit niche. Noticed that they seemed to have overpaid for their share (52% of 28m is 14m, they paid 34m in cash). Questions around control – if control is correct then should form part of the consolidated financial statements. Material issue as 10% of Total Assets. Few other bits to hopefully grab some marks.

Idk how it went, think there was a lot to write about and I ran out of time towards the end. Spent too long on A in the audit risk section. See what happens in January – good luck all.

[granal03]

Anyone doing Question 2?

The deferred tax part C bit, did anyone write about the company appearing to struggle continue its trading operations and therefore a deferred tax asset couldnt be recognised becase you cant right off tax losses when there isnt an underlying asset?

Also question 2 part A did people just write that it was a lease and so you recognise a right of of use asset ?

Was confused by the loan being paid in preference shares, I wrote essentially their model changed because they were no longer just receiving cash flows, thye were exchanging financial assets for one another. Also what they did was essentially purchase a hedge, where they exchanged the loss on the loan for pref shares that could triple in value covering the loss?

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