[salman7]

Thank you for your comments.

As per my understanding, only operating lease of the lessors can be an investment property as per IAS 40.

This item of investment property has not been examined yet?

[salman7]

Ok.

So JV is always used where there is 50% share-ownership is involved?

and JO is used where part of Balance Sheet is shared between two or more parties in equal shares?

[salman7]

Hi,

It says “Close all applications, apart from Finder and OnVue.” OnVue is the software which we download to check system and we will use it during the exam. What is Finder application?

Thanks,

[salman7]

Thank you,

In this question, the client is a leading supplier of machinery used in the quarrying industry. It means it a competitive market. Also “In recent weeks, several customers have returned equipment due to faults, and Dali Co offers a warranty to guarantee that defective items will be replaced free of charge.”

Can we write about inadequate going concern disclosures in answer, because this inventory (Bespoke and Generic machinery) is very important to the client and the reputation damage from the faults is high affecting going concern? I think ACCA suggested answers should have going concern point.

Regards,

[salman7]

Ok. Thanks,

Also the presentation of the “other operating income” in “Statement of Profit or Loss” coming after revenue is fine or it needs to be after operating profit?

Regards,

[salman7]

Dear tutor,

Thank you for your comments.

I read the start of the last paragraph as “The answer as copied out by you is assuming that IT IS consignment inventory” Please correct me if I am wrong.

For any question in exam, if risks and rewards is mentioned, then I think the lease accounting will apply?

Regards,

[salman7]

Dear tutor,

Thank you so much for your comments !!

[salman7]

Dear tutor,

Thank you for your comments.

For additional review by different indivisuals as you mentioned, it will normally be “an independent second partner to review the work performed” as written in ACCA suggested answer of Pointer & Co – Mar 2018 Question 2ai?

[salman7]

Dear tutor,

The request to accompany client to a meeting with bank is covered somewhere in code of ethics somewhere? As per ACCA answers, in case of listed clients, no one from audit firm should attend the meeting and in case of non-listed clients, another partner other than the audit partner can accompany the client which is the case in “Chester & Co – Dec 2013 4b”. Please confirm. The reason may be more chances of legal action against audit firm in case of listed clients.

Thanks for your comment.

[salman7]

Ok thank you so much !

I am not sure when to write about “auditor liability”. Is it part of ethics?

[salman7]

Ok. Yeah it can also be categorised as “Business Relationships” so a blend of “Business Relationships” and “Internal audit services”.

Also, I am not sure about relationships of management threat, advocacy threat and legal proximity. Mostly they are together in ACCA answers. For example, if auditor accompany audit client to a meeting with bank to discuss about getting finance, then there will be management threat. Advocacy and auditor libaility will also arise as auditor promotes the position of the client such that objectivity is compromised.

Thank you so much.

[salman7]

Ok. Understood. Thanks,

Business development advice is internal audit services?

[salman7]

Dear tutor,

Understood. Audit firm will also be taking management responsibility while computing tax figures. Taking mngt responsibility is allowed if safeguard is applied i.e., if management makes all judgements and decisions. Correct?

Thanks,

[salman7]

Dear tutor,

Thank you for your vaulable comments.

I could not get this part of your comment. “you are more likely to make things up from a list and that will not earn marks.”

Also, the Engagement Quality Control Reviewer is called Key Audit Partner who needs to be rotated after continuous period of seven years as per the Ethics Code?

Thanks,

[salman7]

Dear tutor,

Ok. Thank you.

1) In you comment: “https://opentuition.com/topic/quality-control-for-firm-and-individual/”, you have said that SACRED are at firm level. I think they are at engagement level. Pls confirm.

2) Engagement QC review is done before audit report is being issued, so can we say that it reduces detection risk and hence reduces audit risk?

3) Should I consider quality control issues in terms of audit process (Client acceptance, Audit strategy and planning, Audit evidence gathering, Review and completion, audit report issuance). I will have to just separate group quality control issues. This may help me in understanding them and to apply them for answering in exam.

[salman7]

Ok. Thanks,

Monitoring is done through hot and cold reviews ?

All hot and cold reviews are Engagement Quality Control Review in fact?

[salman7]

Dear tutor,

Ok. Thank you so much !

One last thing, previously when I studied audit, I was using term “audit report”.

Now everywhere, the term is “auditor’s report”. Should I use this term or I can use “audit report” as well in answering?

[salman7]

Dear tutor,

As you said “the terms modified/unmodified concern only the audit opinion”, I check the standards and found that standards have used modified/unmodified with opinion (for example, ISA 705 says all about modifications of opinion which are Qualified, Adverse and Disclaimer) and there are separate standards for additional paras of Emphasis of Matter Para and Other Matter Para which is ISA 706. ISA 701 is about KAM. ISA 570 is about going concern covering MURGC.

But in BPP study text, they have divided audit report into:
1) Unmodified report which is unmodified opinion infact.
2) Modified report with unmodified opinion – Covers Emphasis of Matter Para, Other Matter Para, MURGC para
3) Modified audit opinions – Material misstatements, and Scope limitation

So should I follow BPP’s classification and answer “Unmodified audit report having unmodified opinion” or should I follow standards and answer “Unmodified opinion and without adding any additional para in audit report”

Thanks,

[salman7]

Dear tutor,

Noted each point and thank you so much for all of your helpful comments.

Thanks again,

[salman7]

Ok. Thank you for clarification.

1) Does the group auditor need to audit the accounts of Northwest as Northwest is a significant component because it is a loss making component and also has significant debt obligations?

2) The BPP provided a tip that “the group auditor’s offer might also be read as saying that the debt could be transferred by the lender, ie so that it did not refer to Northwest Co at all.” What does this mean?

Thank you for your comments.

[salman7]

Dear sir,

The suggested answer says “if the debt obligations were ‘transferred’ to the parent using an appropriate journal, they would be replaced by a matching liability to the parent company in the FS of Northwest Co, and the same problem would exist and while this would be eliminated in the CFS, this does not allow the auditor of Northwest Co to gather sufficient approproate evidence in relation to the going concern status of the company.”

Further, it says “The group engagement partner is recommending inappropriate accounting treatment to transfer the debt into the parent company without any matching liability in Northwest’s accounts, i.e., by transferring the debts and then consequently cancelling any obligations from Northwest Co due to Valerian Co.”

Can you please explain these two statements.

Thanks,

[salman7]

Dear sir,

Your comments needed please. Thanks.

[salman7]

Dear sir,

Thank you for clarifying.

For 4), It is mentioned in answer that “Given the comment that the inventory count appeared unorganised, it is possible that management’s instructions were not being followed or that some items were missed from counting.” It says only about omission and it does not say about the possibility of duplication of inventory count?

For 6), The inventory issues could be a significant control deficiency because it can lead to a material misstatement?

Best regards,

[salman7]

Thanks. I could not find this question in past papers. sir, from which attempt?

[salman7]

Dear sir,

Thank you so much for the clarification !

I also need to confirm that:
1) This government regulations may affect the goodwill and hence the going concern status, valuation of fixed assets and inventories of the component.
2) Goodwill and fixed assets of the component may have been impaired.
3) It may also affect other group components as they may have the restricted products of Daisy Co. The valuation of their inventories should be adjusted to the lower cost and NRV.

4) Further in “Further Actions” of recommended answer it is mentioned that “The group audit team should confirm the materiality level which was used in audit procedures is in line with their assessment of an appropriate component materiality” I am not sure what it is trying to say. Maybe it is saying that “the group engagement team, or a component auditor on its behalf, shall perform an audit of the component using component materiality”.
5) Or component auditor and group auditor will use different materiality levels for the audit of the component?

Thanks,

[Author]

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