*** P7 December 2012 Exam *** Instant Poll and comments***

no im not saying raising going concern is wrong , i can definitely see where you are coming from, there are “factors” quote and quote that might indicate that. its just for me to say that they might not be a going concern is very very harsh, are we asaying that the financial statements should not be prepared in a going concern basis? prepare it like theyre folding down their business? despite decline in sales i remember revenue was still very very healthy, sure its not ideal but the decline was less than 10 percent, what companies dont experience that in the current crisis? yet are we saying that all companies that are affected by the crisis or decline in sales have gg concern issues?
i know where youre coming from its just in my opinion to say that would be very harsh and almost like “an easy way out” to answer this type of question — ” oh increased debt gg concern, oh falling sales gg concern”

I think people are saying that GC issues was a business risk, ie risk that the entity will not be able to meet its objectives in the future, and not GC as a ROMM as that is risk that company should not have prepared their accounts on a going concern basis at the SOFP, I do not think the latter was the case in the question.

IAS 23 is mandatory in IFRS international.

I dont think that point about the loan was very clear, going by the confusion stated by everyone here lol.

anyway lets forget it and enjoy Christmas 🙂

Haha I concluded business risk briefing notes and then I thought I didn’t discuss compliance risk .. Of not using some chemicals 🙂 I wrote it after conclusion haha presentation I hope marker won’t mind as we all were nervous 🙂
And keyboard ..
U write exactly like me
Except for the loan
Well loss of key personnel was a major risk of material msisstaement because they said good terms means ok no litigation
But what will be the impact of leaving of core staff on financial statement , due to this loss of key personnel I mentioned most of the account balance will not be adjusted properly , definitely a control risk leads to many risk of material misstatement in FS 🙂

it was nice exam. not the difficult one. if any body prepare more than 50% syllabus, s/he definitely pass it

hey guys, any one attempted the audit report ques…my ans was a disclaimer of opinion because i thought there wasnt sufficient evidence and the matter was material, however was not too sure whether it was pervasive, but given that it affected >1 caption I considered it as such…any thoughts?

overall i didnt find the paper to be difficult but time was a serious issue, didnt have time to do the 22mark ques from q2. Here’s a summary of my ans to whole paper as far as i remember…

Q1.
biz risk:
-xchange rate exposure+no hedge
-reliance on one supplier+decreased bargaining power
-Inability to increase local customer base+low market growth
-Loss overseas market share–>reduced revenue
-Faulty prod–>increased cost
-Development–>increased cost+no CF generation soon
-Loss for the year+liquidity issues

ROMM:
-Inventory overstated
-Borrowing cost (i mentioned it should be classified in WIP because development had not been completed @YE but im really not sure about this, it got me a bit) + I included the calculation, but for the part of borrowing cost to include in WIP I excluded to part relating to overdraft-dont know how correct that is)
-Misclassification of overdraft
-Going concern disclosure due to BR in Q1 (honestly i think my brain froze, i could pick up any other misstatements so, i just put the GC)

Ethical issues: (im not really good at those)
FC:
-familiarity to audit team
-self-interest
Audit fee:
-size of fee should not be >norm
-risk profile of client
-No contingent fee

b)Insurance recoverabilty:
*Assess mgnt’s assumptions for recoverable amount
*Recoverability of balance from insurance
-obtain confirmation of recoverable from insurer
-obtain policy docs
-review policy’s terms and conditions of claim recoverability
-Obtain management’s schedule
-Check accuracy of schedule
-Trace a sample of items to invoices (Inventory purchase)
-review classification of adjustment

Q2: (only had time to answer general state the adv and disad of joint audit did not relate to the small scenario:
ADV:
-share resources
-shared knowledge of incumbent auditor
-cost efficiency
-way of reducing ‘big 4’ power
DISAD:
-2 fees to be paid (increased costs)
-different metholodgies (potential for conflict)

Q3)
a)Tender doc: (wasnt sure about this either)
-audit firm and audit team’s competence & experience
-time-table
-fees
-audit methology
-management responsibilities
-regulations of stock exchange

b)Ethical issues (not my strong point):
1)-risk of taking on high risk client simply to boost sales & ultimately bonus
-put company in an advocacy threat position if the company were to ever be GC
-self review
-familiarity
2)-self review
-management threat-reporting to board as external audit on issues about management which as internal auditor contributing to

Q4)DID NOT CHOOSE THIS OPTION

Q5)
ai)Effect on audit report
-evidence=insufficient
-written representation=insufficient (cannot delegate responsibility for obtaining evidence to the outsourcee)
-issue=material
-issue=pervasive (affects >1 caption in FS)
-inform TCWG (ISA260)
-inform mgnt of deficiency (ISA265)
-Issue modified audit report (disclaimer of opinion)

ii)QC
-2nd partner review of appropriateness of opinion
-review of evidence supporting opinion
-review documentation and work of audit team members-whether followed appropriate QC policies

b)Interim review (did not go over this topic, so just scribbles some notes)
-calculation of materiality (@YE and interim period-both material)
-appropriateness of zero provision given unlikely that all 3year warranties would have expired even if no new ones
-Interim report-subject to more adj @YE
-should review above before providing negative assurance on interim report on whether free from any material misstatement, esp related to warranties.

ANYONE THNK I CAN AT LEAST SCORE A 50%, its my first attempt and did not have time to practice past papers so i really dont know how examiner approaches marking….

In review part . I mistakenly took it as audit
But anyway provision must be recognised . As per given numbers , provision was material last time
Plus an implied obligation! So they can’t stop like that.
Discuss with mgmt , adjust it , no change to the interim report.
If not adjust then obviously it will have an impact as per negative assurance

Q2 is required to write too much… and it is not so hard, but again, it seems test on writing speed.

Relatively with the previous p7 exams this one was fair,but still little time shortage