Homework answers / question archive / HI6026 AUDIT, ASSURANCE AND COMPLIANCE  final assessmeNt Trimester 1, 2022     Assessment Weight: 50 total marks   Instructions: All questions must be answered by using the answer boxes provided in this paper

HI6026 AUDIT, ASSURANCE AND COMPLIANCE  final assessmeNt Trimester 1, 2022     Assessment Weight: 50 total marks   Instructions: All questions must be answered by using the answer boxes provided in this paper

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HI6026

AUDIT, ASSURANCE AND COMPLIANCE

 final assessmeNt

Trimester 1, 2022

 

 

Assessment Weight: 50 total marks

 

Instructions:

All questions must be answered by using the answer boxes provided in this paper.

Completed answers must be submitted to Blackboard by the published due date and time.

 

Please ensure you follow the submission instructions at the end of this paper.

 

Purpose:

This assessment consists of six (6) questions and is designed to assess your level of knowledge of the key topics covered in this unit.

   

  

 

 

 

Question 1 (7 marks)

Prospo Ltd is a major manufacturer of medical diagnostic machines and advanced surgical equipment for the Health Services industry. Prospo uses a complicated accounting information system called ZAP. Detailed below is a description of Prospo’s purchasing and payments system.

 

(i) When the production department requires items to be purchased, a pre-numbered purchase order is created, which is manually entered into the ZAP computer system by the procurement supervisor. The purchase order is then automatically routed to the purchasing department, who then forwards it to the accounts payable clerk when it is ready.

 

(ii) When the goods are received, the receiving department logs the shipment by entering “order received” in the ZAP computer system which also compiles a date and time-based receiving report of all confirmed deliveries at the end of the day. One copy of the receiving report is filed in the receiving department and the other is forwarded to the accounts payable department.

 

(iii) The accounts payable clerk matches the purchase order number, confirms the date of goods delivery, based on the receiving report, and then obtains the supplier’s invoice, which is normally sent by mail. When the invoice is received, the Accounts payable clerk then enters “Approved” in the ZAP computer system.

Required: 

[3 * 2.33 = 7 marks]

For processes (i) – (iii) identified above, identify the control weaknesses and outline control measures/recommednations which describe what Prospo Pty Ltd can do to address the weaknesses identified. (7 marks) 

ANSWER: ** Answer box will enlarge as you type

 

 

 

 

 

 

 

Question 2 (5 x 1.75 marks = 7 marks)

Consider the following independent cases found during the assurance engagement of XYZ Ltd, a large listed manufacturing business with operations in all capital cities of Australia. Recently XYZ has experienced significant operational and industrial relations issues. XYZ Ltd has a balance date of 30 June 20X8. 

 

XYZ Ltd has been involved in a protracted wages dispute with the employees’ trade union. In July 20X7 the employee’s trade Union launched a class action against XYZ Ltd. In May 20X8 a legal decision was handed down in favour of the plaintiff (the trade union). All XYZ Ltd employees won a back-pay wages dispute amounting to 50% of their current salary levels. Under the terms of the legal judgement, the back-pay amount affects all current employees of XYZ Ltd. Although the Board and Senior Management have agreed to not challenge the court’s decision, in spite of their legal advice, they have not yet made any adjustments to the 30 June 20X8 financial report. This is against the recommendation of the Lead Audit Partner. (1.75 marks)

 

Over the past twelve months XYZ Ltd has had difficulties obtaining enough raw materials from its normal overseas suppliers. As a result, XYZ has had to seek new suppliers from other locations. A large order of business-critical supplies from an African supplier was shipped FOB (free on board) from Johannesburg, South Africa on 30 June 20X8. The order arrived on 20 July 20X8.However, the purchase is not included in the 30 June 20X8 financial report because the CFO has a difference of opinion with the Lead Audit Partner. (1.75 marks)

 

On 1 July 2018 the CEO of XYZ Ltd resigned amid allegations of financial reporting manipulation. This was a major embarrassment to the company and was widely reported in the financial media. An internal investigation was performed by the Internal Auditors of XYZ Ltd and it concluded that the bonus and incentive scheme was incorrectly calculated with the effect that the relevant provisions are over-stated. Management has agreed to make the necessary adjustments, but is not prepared to make any disclosure of the issue in the Annual Report because it is concerned about how it would affect the company’s reputation. (1.75 marks)

 

Given the difficulties that XYZ Ltd has experienced over the past year, the Chairman and Directors of the Board consider it necessary to restore trust and confidence in the company. They are concerned that shareholders will ask embarrassing questions at the upcoming annual general meeting. The draft chairman’s report to go with the financial report has been provided to the auditors. It states that the operating revenue of a particular segment of the company’s overseas operations increased by 80% during the period. On reviewing the figures, you found that operating income increased by only 8%. (1.75 marks)

 

Required:

For each situation, identify the issues, the type of audit opinion required and explain the basis of your answers.

ANSWER:  

 

 

 

 

 

 

 

 

 

Question 3 (7 marks)

The Australian Securities Exchange (ASX) Corporate Governance Council’s Corporate governance principles and recommendations with 2010 amendments, provides some important guidelines for best practice in corporate governance for all companies, including the importance of the Audit Committee. 

With reference to these principles, discuss why they are relevant when planning the audit and how the adoption of all eight ASX corporate governance principles by the company being audited will affect the auditor’s risk assessment. Also, discuss the role of the Audit Committee.

ANSWER:  

 

 

 

 

 

 

 

Question 4 (7 marks)

You are the audit senior responsible for the audit of Sampson Limited. You are currently planning the audit for the year ended 31 December 20X7. During your initial planning meeting held with the financial controller, he told you of the following changes in the company’s operations.

 

Due to the financial controller’s workload, the company has employed a treasurer. The financial controller is excited about the appointment because in the two months that the treasurer has been with the company he has realised a small profit for the company through foreign-exchange transactions in yen. (1.75 marks)

Sampson has planned to close an inefficient factory in country New South Wales before the end of 20X7. It is expected that the redeployment and disposal of the factory’s assets will not be completed until the end of the following year. However, the financial controller is confident that he will be able to determine reasonably accurate closure provisions. (1.75 marks)

To help achieve the budgeted sales for the year, Sampson is about to introduce bonuses for its sales staff. The bonuses will be an increasing percentage of the gross sales made, by each salesperson, above certain monthly targets. (1.75 marks)

The company is using a new general ledger software package. The financial controller is impressed with the new system, because management accounts are easily produced and allow detailed comparisons with budgets and prior-period figures across product lines and geographical areas. The conversion to the new system occurred with a minimum of fuss. As it is a popular computer package, it required only minor modifications. (1.75 marks)

 

   Required:

For each of the scenarios above, explain how the components of audit risk inherent, control or detection risk) are affected. (7 marks)

ANSWER:  

 

 

 

 

 

 

Question 5 (11 marks)

There may be occasions during the course of an Auditor’s career when he/she is faced with an “ethical dilemma”. This may arise due to a conflict of interest or where a choice must be made between two or more ethical principles. 

Using your knowledge of ethics, as outlined in the APES 110 Code of Ethics for Professional Accountants,in your own words, explain the five (5) fundamental ethical principles and discuss what auditors can do to resolve ethical dilemmas when presented with conflicts of interest.

ANSWER:  

 

 

 

 

Question 6 (11 marks)

In your own words, explain why the auditor’s assessment of the appropriateness of the going concern assumption is so important?

ANSWER:  

 

 

 

 

 

END OF FINAL ASSESSMENT

 

Submission instructions:

Save submission with your STUDENT ID NUMBER and UNIT CODE e.g. PFEC1234 HI6026 

Submission must be in MICROSOFT WORD format only

Upload your submission to the appropriate link on Blackboard  

You have two attempts to submit your assessment with only the final submission being marked.  

Please ensure your submission is the correct document as special consideration is not given if you make a mistake.

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