You, the managing partner of YYS & partners, are the external auditor of Mepilex Ltd, a
company which is a discount chain store which sells imported wines. Mepilex Ltd is a
subsidiary of Mepilex OJY, Finland. You have been auditing the company since it was
listed on the Singapore Exchange (SGX) in 2006. Although the financial reports have
never been qualified, you are aware that the company has been making losses for the
last 3 years (2009, 2010, and 2011) due to short-term cash flow difficulties. The
company has no long-term loans and the bank overdraft is near its limit at the end of the
financial year.
During the financial year 2012, several of your staff recently completed a review of the
internal controls at the company. The work was charged at 120 per cent of the usual
consulting fees to partially recoup the lower audit fees brought about by a competitive
tender. At the client's request, your audit staff implemented all the recommended
changes in procedures by updating the company's accounting manual and running a
two-hour training session for the accounting staff. As audit staff had already performed
significant work on Mepilex’s internal controls, you had decided to assess control risk as
low and not perform any tests of control.
The company has been experiencing declining sales over the last two years. Cost
cutting has proved difficult, and consequently, margins have been falling. While the
bankers are presently happy to continue providing the company with loan facilities, they
do expect to see improved results in the next financial report. Articles about the
company's expected financial results appearing in recent press reports all had quite a
pessimistic tone.
Until 31 December 2011, data processing relating to payroll was performed at the
company’s centralised processing department. However, as from 1 January 2012,
processing of payroll transactions has been carried out centrally by an external
independent computer service company.
Since its incorporation in 2006, the company has adopted a conservative business
strategy that has seen it produce unimpressive results. A new CEO has been appointed
to run the firm from 1 April 2013. He has already released his plans for renovating the
chain, despite not officially serving as CEO yet. You have also heard him discuss the
implementation of a new marketing strategy to boost revenues.
During the financial year 2012, the company has upgraded its accounting system to a
computerised database. A consultant was hired to aid in the correct changeover of files for this computer information system. This system has been up and running for six
months before year-end, and directors report they are happy with the way it is
operating. As you have never before audited a database system, you attend a series of
courses put on by professional computing consultants to familiarise yourself with this
type of system. You also ask a close friend, who is a computer audit specialist with one
of the major chartered accounting firms, for a list of audit tests which were used to test a database computer system. You adopt this list of audit steps, but change it to
accommodate the fact that the system changed during the year. As you do not have the
expertise to review and evaluate the database management system (DBMS), you have
an independent expert undertake this evaluation. This person concludes that the DBMS
appears reliable and that the changeover was correctly carried out.
The internal auditor, who worked for the company since its listing, also reviewed the
changeover procedures and subsequent running of the database and concluded that
the system was operating satisfactorily. Reliance is placed on the work of both the
expert and the internal auditor.
In your review of the minutes of the board of directors' meetings, you become aware
that the Finnish parent company, which owns 55 per cent of the shares of the company,
may be considering privatising the company on the basis that the company's share price
is trading well below its net asset backing.
After the 31 December 2012 financial reports were published, the takeover offer from
the Finnish parent company proceeded on the basis of an offer price equivalent to the
net asset backing of $1.31 per share as determined from the financial reports. This
takeover offer resulted in acceptances to 96 per cent of the issued capital, and
compulsory acquisition proceedings have been instituted for the other 4 per cent of
share capital.
While these compulsory acquisition proceedings were being instituted, it was
discovered that there were errors in the changeover of the computer system which
resulted in inventory at the duty-free stores being materially misstated, and after write
down of inventory for the misstatement a new asset backing per share of $1.02 was
established. The Finnish parent company is suing you for alleged negligence for their
loss of 30 cents per share.
Require:
1. For each of the above independent situation describe the overall impact on audit risk and identify the specific components of audit risk affected.
2. Will you be liable for the loss of Finish parent company
Em làm ntn, nhưng không biết đúng hay sai nữa, mong các anh chị expertise giúp em với ạ, 24 August em thi rồi
Factor -> audit risk model component (effect on the risk of material misstatement)
1. Mepilex is a old client -> inherent risk (decrease)
2. financial statement is qualified -> acceptable audit risk (decrease)
3. making losses over 3 years -> acceptable audit risk (increase)
4. company has no long term loan and bankoverdraft is nearly its limit -> inherent risk ( increase)
5. update company accounting manual -> control risk (decrease)
6. running 2 hours training season for accounting staff -> planned detection risk (decrease)
7. decline in sales -> acceptable audit risk (increase)
8. cost cutting is proved to be difficult -> control risk (increase)
9. on 31 Dec 2011, data processing relating to payroll was performed at the company centralised processing department. However, from 1 Jan 2012, .... payroll was performed at external independent computer service company -> control risk (increase)
10. a new CEO has been appointed -> inherent risk (increase)
11. release his plan of renovating, implementation or new marketing strategy -> inherent risk (increase)
12. upgrade its accounting system to computerized database -> inherent risk (increase)
13. a consultant was hired to aid in the correct changeover or files for this computer information system -> inherent risk (increase)
14. you haven't audit a database system before -> planned detection risk (increase)
Còn ý thứ 2: thì e nghĩ, câu trả lời là not responsible for the Finish parent company for its loss because the external auditor didn't know the purpose of Finish parent company when relying on this financial report, thêm vài ý của case Caparo Industries v Dickman và case Kingston Cotton Mills Co. Ltd vào nữa để phân tích
Mọi người giúp em với ạ.
Em cám ơn trước
company which is a discount chain store which sells imported wines. Mepilex Ltd is a
subsidiary of Mepilex OJY, Finland. You have been auditing the company since it was
listed on the Singapore Exchange (SGX) in 2006. Although the financial reports have
never been qualified, you are aware that the company has been making losses for the
last 3 years (2009, 2010, and 2011) due to short-term cash flow difficulties. The
company has no long-term loans and the bank overdraft is near its limit at the end of the
financial year.
During the financial year 2012, several of your staff recently completed a review of the
internal controls at the company. The work was charged at 120 per cent of the usual
consulting fees to partially recoup the lower audit fees brought about by a competitive
tender. At the client's request, your audit staff implemented all the recommended
changes in procedures by updating the company's accounting manual and running a
two-hour training session for the accounting staff. As audit staff had already performed
significant work on Mepilex’s internal controls, you had decided to assess control risk as
low and not perform any tests of control.
The company has been experiencing declining sales over the last two years. Cost
cutting has proved difficult, and consequently, margins have been falling. While the
bankers are presently happy to continue providing the company with loan facilities, they
do expect to see improved results in the next financial report. Articles about the
company's expected financial results appearing in recent press reports all had quite a
pessimistic tone.
Until 31 December 2011, data processing relating to payroll was performed at the
company’s centralised processing department. However, as from 1 January 2012,
processing of payroll transactions has been carried out centrally by an external
independent computer service company.
Since its incorporation in 2006, the company has adopted a conservative business
strategy that has seen it produce unimpressive results. A new CEO has been appointed
to run the firm from 1 April 2013. He has already released his plans for renovating the
chain, despite not officially serving as CEO yet. You have also heard him discuss the
implementation of a new marketing strategy to boost revenues.
During the financial year 2012, the company has upgraded its accounting system to a
computerised database. A consultant was hired to aid in the correct changeover of files for this computer information system. This system has been up and running for six
months before year-end, and directors report they are happy with the way it is
operating. As you have never before audited a database system, you attend a series of
courses put on by professional computing consultants to familiarise yourself with this
type of system. You also ask a close friend, who is a computer audit specialist with one
of the major chartered accounting firms, for a list of audit tests which were used to test a database computer system. You adopt this list of audit steps, but change it to
accommodate the fact that the system changed during the year. As you do not have the
expertise to review and evaluate the database management system (DBMS), you have
an independent expert undertake this evaluation. This person concludes that the DBMS
appears reliable and that the changeover was correctly carried out.
The internal auditor, who worked for the company since its listing, also reviewed the
changeover procedures and subsequent running of the database and concluded that
the system was operating satisfactorily. Reliance is placed on the work of both the
expert and the internal auditor.
In your review of the minutes of the board of directors' meetings, you become aware
that the Finnish parent company, which owns 55 per cent of the shares of the company,
may be considering privatising the company on the basis that the company's share price
is trading well below its net asset backing.
After the 31 December 2012 financial reports were published, the takeover offer from
the Finnish parent company proceeded on the basis of an offer price equivalent to the
net asset backing of $1.31 per share as determined from the financial reports. This
takeover offer resulted in acceptances to 96 per cent of the issued capital, and
compulsory acquisition proceedings have been instituted for the other 4 per cent of
share capital.
While these compulsory acquisition proceedings were being instituted, it was
discovered that there were errors in the changeover of the computer system which
resulted in inventory at the duty-free stores being materially misstated, and after write
down of inventory for the misstatement a new asset backing per share of $1.02 was
established. The Finnish parent company is suing you for alleged negligence for their
loss of 30 cents per share.
Require:
1. For each of the above independent situation describe the overall impact on audit risk and identify the specific components of audit risk affected.
2. Will you be liable for the loss of Finish parent company
Em làm ntn, nhưng không biết đúng hay sai nữa, mong các anh chị expertise giúp em với ạ, 24 August em thi rồi
Factor -> audit risk model component (effect on the risk of material misstatement)
1. Mepilex is a old client -> inherent risk (decrease)
2. financial statement is qualified -> acceptable audit risk (decrease)
3. making losses over 3 years -> acceptable audit risk (increase)
4. company has no long term loan and bankoverdraft is nearly its limit -> inherent risk ( increase)
5. update company accounting manual -> control risk (decrease)
6. running 2 hours training season for accounting staff -> planned detection risk (decrease)
7. decline in sales -> acceptable audit risk (increase)
8. cost cutting is proved to be difficult -> control risk (increase)
9. on 31 Dec 2011, data processing relating to payroll was performed at the company centralised processing department. However, from 1 Jan 2012, .... payroll was performed at external independent computer service company -> control risk (increase)
10. a new CEO has been appointed -> inherent risk (increase)
11. release his plan of renovating, implementation or new marketing strategy -> inherent risk (increase)
12. upgrade its accounting system to computerized database -> inherent risk (increase)
13. a consultant was hired to aid in the correct changeover or files for this computer information system -> inherent risk (increase)
14. you haven't audit a database system before -> planned detection risk (increase)
Còn ý thứ 2: thì e nghĩ, câu trả lời là not responsible for the Finish parent company for its loss because the external auditor didn't know the purpose of Finish parent company when relying on this financial report, thêm vài ý của case Caparo Industries v Dickman và case Kingston Cotton Mills Co. Ltd vào nữa để phân tích
Mọi người giúp em với ạ.
Em cám ơn trước
) 
*quay tường tự kỷ*
