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Sun Group Hotel, unlisted. Operates hotels in various countries.
Unique selling is that it is a beach resort that offers water sports like scuba diving in the price packag.
Email from partner
Identify business risks and explain how it can lead risk of material mistatement.
Audit planning issues in light of a litigation claim made by Ocean Protectors for breach of environmental legislation. Finance director is reluctant to disclose the potential damages of £10m. 100% of profit before tax. Was in the process of negotiating with the environment group and get an agreement to pay less and also protect the coral reefs. Did not want us to contact the environment group or any other ee.
Prinicipal audit procedures to be performed in respect of the claim if all access to info was givenBusiness risks.
Political instability- inappropriate acquistions
Hurricane damaged 2 hotels
New acq in alternative location fully funded by undrawn borrowing facility
.2. Goldline plc. Petroleum company.
A. Decommissioning provision
Recognised in FS
430m y.e 30.6.17
488m y.e 30.6.16
Change in policy of estimating decommission amount. Previously used expert. Discount rate 8%, now but 6%prior yr.
Expected to decommission by 2046
Mgt estimated this yr.
B. Depreciation of Plant & equipment.
Pe carrying value £65m. Change in estimation policy. Useful life 10yrs. Chnge to 15yrs. Straight line depn policy. Finance director informed the reason being the assets were now anticipated to last longer
Restated prior period figures causing an increase PPE value by £20m. Taken to retained earnings. Depn recognised in accounts £12m nw prior yr £15m3. Trade receivables
Residential and business customers.
Loss allowance for credit loss recognised when customer pay more than 90 days late n have a history of non payment.
Receivables days increased in 2017 to 65 days compared to 58days in 2016.Comment on the matters and audit evidemce expected to find in the file review.
Q3.Due diligence of a new acq. Explain the implications of 2 issues below and further investigation to be done
Q4. Comment on the ethical and professional issues raised and reccommend actions taken
A. DINGO LTDListed client. Previois auditor given modified opinions in respect of purchase licenses expensed and not capitalised. B. Foxtrot ltd.
Longstanding client. Audit partner on audit team fr 12 years.Client threatens not to renew contract if partner removed.
C. Review engagement. Really cant remember. Rushed these towards the endI remember there was self interrest and intimidation threat.
Hope I wrote enough to pass.
• Pavithra
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