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for prospective financial information question in part 3(a) in “recommend the further audit procedures which should be performed”
1. may i ask if we can review board minutes to confirm the approval of repayment of the chief executive’s loan and when it will be repaid(i.e within 31 March 2018) and further confirm which means it will be paid(i.e sell investment in listed shares) ?
2. also, can i say obtain documents of chief executive’s loan to confirm the date of repayment, till when it has to be paid, and the amount (i.e 500,000) ?
i know PFI is for the future but my answers do seem related to the future but it’s not quite similar to the answer sheet so i may need your help
When a company takes a loan – whether from a bank or, as in this case, a director – you would expect there to be a loan agreement. So the document to confirm the details in your 2. is the loan agreement – this is for the AUDIT because the audit team was unaware of the loan prior to obtaining the cash flow forecast. (This is particularly relevant to part (b).)
The board does not have meeting to approve payments to suppliers/lenders – the company’s obligation to pay has to be honoured (or otherwise face the consequences!)
So 2. is fine (this is in the answer).
Then, how about these ?
3. obtain loan document to confirm the amount of 500,000 shown in the cashflow forecasst and discuss with management how they will pay the remaining amount if the fair value of investment is lesser than 500,000 (e.g 350,000 )
Please see the sticky post at the top of this forum “Looking for guidance on marking?” I think it well worth your time to attempt the two Qs indicated and mark your own answers.
Then, when you review other answers against published answers you should be able to assess whether what you have written is a point that gets a mark or not.
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