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Yep, that’s the question I got.
Just spoke about how RP requires management disclosure, difficult for auditor to detect themselves.
Then spoke about the lease and loan, questioning validity, existence, nature
incentive for management etc
Could be all wrong though lolDid anyone get Telford Q1 with the significant ROMMs?
Was materiality at $430k?And Q3, for the audit opinion, anyone go with qualified?
Did anyone have last question Sustainability Report and Professional Scepticism? Were the reference materials right?
These are the questions I got.
q1
– govt grants
– covenants
– goodwill (why is is significant RoMM, audit procedures)
– going concern
– heavily geared companyq2
– sustainability reporting
– ethics ( additional engagement of audit client)q3
– provision for contaminated products
– comment on audit opinion
– non-disclosure of related party transactionA lot of difficult areas were tested. I’m really nervous.
I got the same. I picked the Lower.level.of materiality though,given the changes in the company being my justification.
Also went for qualified opinion, logic being that the finance costs were not capitalised.
What were your reasonings for the performance measures one (injury time off I think?)
First question was the theatre group.
A) business risks
B) material misstatements (only wrote 6 paragraphs essentially 4 points) I mentioned the government grant and the provision financial analysis on the revenue and assets and a materially calc) – not feeling confident about this one
C) was about material misstatement for the acquisition that took place in the year with goodwill audit procedures
D) auditors responsibilities to non-compliance, this i felt went quite wellSection 2 was a completion review and reporting qs – related party transactions and provisions and appraisal of auditors report
Section 3 was sustainability reporting – not pleased with this at all! It was very hard to identify the ethical threats in qs 2 when asked matters to be considered before accepting the engagement. So I only wrote three paragraphs two about professionalism – spent way too long on this also I wish I had given up and spent more time on qs 1
Recap for my test AAA_Sep 2024
[1] Telford Co, unlisted comp.
(a) Business risk (8-mark)
Foreign exchange risk when the company has four autocentres in a foreign country (Farland)
SET licences could be revoked by appropriate authority
Poor review from customers
(b) Significant ROMM (16-mark)
IA recognition from Investment in Associate
Bonus of FD
FX fluctuation (IAS 21)
(c) Audit procedures with respect of Investment in Associate (6-mark)
(d) Ethical and professional considerations related to the engagement of Internal audit of the company (10-mark)[2]
(a) 8-mark
(i) Why all RP transactions are difficult to identify for the auditor, linking to the case of Melody Co Melody Co has RP transactions including Lease contract and Loan contract.(ii) Matter should be considered in RP transactions in Melody Co and the evidence is expected to obtained in the planning audit.
I dont remember exactly “obtained in the audit” or “in the planning audit”.>> I wonder “the evidence” is the same what the audit procedure obtained or not. So I answer by “Obtain the loan contract”, “Discuss with management…”
Would I gain marks for my answer?(b) The FD denies to provide Loan contract. He thinks its wasteful. What matters should be concerned? (8-mark)
(c) One question 4-mark
[3]
(a) Capitalisation of costs of construction and interest expense. What matters should be considered and the evidence should be obtained?
I wonder again that the evidence is the same the audit procedures would be obtained?(b) Limitation of the scope.
About travel costs.i used the lower end of materiality but i thing there where indications on using the higher end because it was unlisted and existing client.
in q3 i used qualified opinion but the reason was for the capitalization of the finance costs.
Thinking about it i thing that i was wrong as if you calculate the finance cost pro-rata is not material and the opinion should have been unmodified.
can anyone comment on this please?
I did the same.
on the opinion i also used qualified on material misstatement but now thinking about it i thing if you calculate the month allocation of the finance cost during the year is not material on its own and i am thinking that the correct answer may be was unmodified opinion.
what do you guys think?
Finance costs were material. 600 000 *5%*9/12=22500 with the materiality threshold set at 20000.
Sustanability question was mainly the risk of greenwashing
greenwashing is to manipulate non financial info to get government grant
source of data is difficult to check
need someone with a special expertise to check and challenge assumption
high uncertainity and risk of manipulation increase risk of non-detection that why auditor should be sceptiscism about non-financial infohonestly i got q1 on Carsonna, and focus on all ROMM that are material in nature
risk of greenwashing (customer satisfaction is high whereas poor quality of products), misearning management with bonus provision scheme, other area impacted with manipulation of numbers, fraud
warranty risk, risk of non-compliance SET, potential claim from regulatory bodies, reputation damage customers suppliers – going concern, revenue wrong, that increase more internal control testingOPEX increase only 1%, provision for warranty claim, provision for onerous contracts were missing.
are highly material in aggregate and in natureQ1 a) business risk – wrote about gov grants, potential of planning consent not given and inability to improve service provided resulting in furtherticket sale reductions, impact of planning breaches, can’t remember the rest
b) ROMM – used materiality at higher end of the range due to being existing client, no obvious significant internal control risk.
Analysed operating profit margins, asset turnover and discussed other risks.
Concluded most significant risk was the risk of repaying debt finance back due to breaching operating profit target.
c)justifying goodwill being a significant risk – wrote about lack of final due diligenceand quick turnaround suggesting corner cut and valuation being inaccurate, management bias in calculations due to wanting to make the Co. Look attractive
d)audit responsibilities in non compliance – can’t remember what I wrote
2 Related party transactions – wrote how they should be disclosed and failure to do so questions the integrity of the manager, suggests hiding for a purpose, owning the company he was paying with lack of paperwork and the payment being for a car for £200k which is a high value for a company car, all suspicious
Suggested evidence expected to see on the file obtained during the audit
Critical appraisal of audit report extract – including basis explanation in the opinion section in error, shouldn’t have detailed in the basis section what evidence a particular person hasn’t provided or that they resign from the audit in the audit report as its unprofessional.
3 Sustainability – wrote about only being able to give limited assurance, auditors not being knowledgeable in the specific Sustainability areas due to being specialist areas, hard to test subjective areas, lack of data capturing processes available for recycling results, potentially not having resource available to carry out the assurance work
Have no clue if I’ve answered these correctly but hoping for a pass as its my last exam, fingers crossed.
@emmamoon It sounds like we had the same variant and that we put similar answers down.
For the first qs I said materiality should be at the lower threshold due to increased ops activity, maybe I didn’t read the extract thoroughly bc I don’t remember them saying that B&Co was as existing client ?.
For qs2 there was also a 6m asking why written rep isn’t enough on it own, I explained that it can only be used to support other evidence in acc with Isa 580 and I think I also added a recommendation of what other evidence they could gather and how, but honestly 6 marks for this question seemed awfully mean.
For the appraisal I also wrote that the resignation was the wrong place to state that and that they should not mention the FD by name as he could sue for defamation. I said also that it shouldn’t be titled opinion but disclaimer of opinion.
Q3 I mentioned KPI metrics how they are difficult to measure as there isn’t a standard set rule and therefore there’s a lot of reliance of judgement. The rest were v similar to yours. I didn’t finish the very last qs in sec 3 bc I was pressed for time – so I mentioned that the recycling metric was unreliable as data was never received by the ops manager.
Fingers crossed for you that you pass! Sounds like you smashed it
For Q1 a) Business risk for 8m i wrote only 5 points and b) ROMM for 16marks i wrote 7points is that sufficient since i don’t have much time.
Did anyone have any issues with typing during the exam?
i went back to develop my points in my answer plan and the words i was typing out were overwriting everything infront of it.
Yess, I have the same issue. I just gave up on adding words for the sentence but in another paragraph.
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