Examination Cover Page Examination Period: 2016 Term 3 Academic Institution: Central Queensland University Academic Group: Higher Education Division Academic Career: Postgraduate Examination Type:...

Examination Cover Page
Examination Period: 2016 Term 3
Academic Institution: Central Queensland University
Academic Group: Higher Education Division
Academic Career: Postgraduate
Examination Type: Standard
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I have read and understood the penalties involved if I do not abide by the rules
outlined on the back of this examination paper.
Student Signature:
Student ID Numbe
Unit: Auditing and Ethics
Subject Area: ACCT
Catalog Number: 20075
Paper Number: 1
Component: ALL Components
Duration: 180 minutes Restrictions: Closed Book
Perusal Time: 15 minutes
First Contact: Sally Chaplin Contact Number: XXXXXXXXXX
Second Contact: Ann Sardesai Contact Number: XXXXXXXXXX
Office Use: Release examination paper via the CQ University Past Exams website two weeks after the DE/SE examination period? Yes
Instructor Authorised/Allowed Materials
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Calculator - non-programmable, no text retrieval, silent only.
Student Calculator - Make:____________________ / Model: ____________________
Special Instructions to Students:
Please see instruction sheet on first page of the examination paper.
Examination Office Supplied Materials
1 x Rough Pape
QUESTIONS ANSWERED MARKS QUESTIONS ANSWERED MARKS
Number of examination answer booklets used:
Number of separate sheets attached (Do not include rough paper):
This examination paper is not to be released to the student at the conclusion of the examination.
Central Queensland University considers improper conduct in examinations to be a serious offence. Penalties fo
cheating are exclusion from the University and cancellation with academic penalty from the unit concerned.
Term 3 Standard Examination 2016

Auditing and Ethics — ACCT20075

Page 1 of 8


Instructions Sheet

1. Write all answers in the spaces provided on this examination
paper.

2. This examination paper comprises five (5) questions.

3. Marks for each question are as indicated. This examination is
marked out of 60 marks.

4. Length of answers are guided by the space provided on this
examination paper. Please write within the space provided.
Term 3 Standard Examination 2016

Auditing and Ethics — ACCT20075

Page 2 of 8
TOTAL XXXXXXXXXX60 MARKS

Question 1 – Planning the Audit XXXXXXXXXX12 Marks
Part A XXXXXXXXXXmarks)
Manuke has drafted an audit plan for a new client. The client is Marquee Starshine, a
party-hire business. Marquee Starshine earns 80 per cent of its revenue from hiring
marquees, tables and chairs, lights and other party equipment and 20 per cent from
sales of disposable crockery, cutlery, napkins and table cloths. Manuke’s plan shows
that audit time is divided to reflect this revenue pattern (that is, 80 per cent of the audit
time is spent on the hire business and 20 per cent of the time is spent on the retail
usiness). Manuke believes that the significance of the revenue activities should be the
only driver of the audit plan because the client has no related parties and a simple,
effective corporate governance structure.
Required
List three (3) questions that you would ask Manuke before accepting his audit plan?

a) ________________________________________________________________
________________________________________________________________
________________________________________________________________
XXXXXXXXXXmarks)
) ________________________________________________________________
________________________________________________________________
________________________________________________________________
XXXXXXXXXXmarks)
c) ________________________________________________________________
________________________________________________________________
________________________________________________________________
XXXXXXXXXXmarks)













Question 1 continued next page

Term 3 Standard Examination 2016

Auditing and Ethics — ACCT20075

Page 3 of 8

Question 1 continued

Part B XXXXXXXXXX6 marks)

Preliminary analytical procedures are performed as part of the planning process to
assist the auditor in gaining an understanding of the entity and its environment (ASA
315 ‘Identifying and Assessing the Risks of Material Misstatement through
Understanding the Entity and its Environment’).

Required:

From the three rows of data shown below for Georgie Manufacturing Pty Ltd:

(a) what conclusions would you draw from the ratio analysis (i.e. interpret any
movement in the ratio and discuss the audit risks that could be present); and

(b) what areas would you then emphasise in conducting the audit in relation to
the risks identified in your conclusions.



Millicent Manufacturing Pty Ltd
XXXXXXXXXX Industry 2016
1. Inventory Turnover XXXXXXXXXX 4.88
2. Cu
ent Ratio XXXXXXXXXX 2.00
3. Days Sales in Receivables XXXXXXXXXX











Question 1 Part B continued next page

Term 3 Standard Examination 2016

Auditing and Ethics — ACCT20075

Page 4 of 8

Question 1 Part B continued
a) Inventory Turnover

Conclusions:
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
Audit Emphasis:
_____________________________________________________________________
_____________________________________________________________________
(2 marks)
) Cu
ent Ratio
Conclusions:
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
Audit Emphasis:
_____________________________________________________________________
_____________________________________________________________________
(2 marks)
c) Days Sales in Receivables

Conclusions:
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
Audit Emphasis:
_____________________________________________________________________
_____________________________________________________________________
(2 marks)




Term 3 Standard Examination 2016

Auditing and Ethics — ACCT20075

Page 5 of 8

Question 2 – Professional Ethics XXXXXXXXXX12 Marks

Charles is at a neighbourhood Christmas party with several of his flatmates. Over a few
eers, Charles gets into a conversation with a neighbour, William, about mutual
acquaintances. Charles is a senior auditor with a large accounting firm (although he
tells William that he is a partner at the firm) and William works for a large bank. During
the conversation Charles and William discover that they have both had professional
dealings with a particular family-owned manufacturing company. William reveals that
the company’s line of credit is about to be cancelled because of some i
egularities with
the security. Charles is concerned to hear this news because he has just participated in
the company’s financial report audit and there was no indication of any problems with
its bo
owings. However, as Charles explains to William, he has his doubts about the
patriarch of the family, whom Charles believes is having an affair with his personal
assistant. Charles also tells William that the family has quietly increased its
shareholdings in a listed company that supplies components to the family
manufacturing company. The components manufacturing company is about to
announce to the share market that it has just won a very large, and very profitable,
contract with a Chinese company.
Required
(a) All members of the professional accounting bodies are to comply with the
fundamental ethical principles (APES 110, s XXXXXXXXXXList the five fundamental
principles of professional ethics.
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(5 marks)
(b) Discuss the ethical principles that are potentially
eached by Charles’s
ehaviour at the party and explain how the principles are
eached.
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(7 marks)
Term 3 Standard Examination 2016

Auditing and Ethics — ACCT20075

Page 6 of 8

Question 3 – Internal Controls XXXXXXXXXXMarks

Documentation of internal controls assists the auditor because the process of preparing
the documentation prompts the auditor to ask detailed questions in order to gain a full
understanding. An experienced auditor would be able to identify departures from the
systems generally used in organisations. There are four common approaches to internal
control documentation.

Required

List four approaches to internal control documentation and assess the advantages
and disadvantages of each.
1.____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(3 marks)
2.____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(3 marks)
3.____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(3 marks)
4.____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(3 marks)
Term 3 Standard Examination 2016

Auditing and Ethics — ACCT20075

Page 7 of 8


Question 4 – Testing XXXXXXXXXXMarks

Your firm is auditing Samson Ltd, a large manufacturer of steel products. You have
een assigned the audit of property, plant and equipment (PPE) for the year-ended 30
June 2016.

Samson Ltd maintains a computerised fixed assets register. The company has three
main classes of PPE: (1) Freehold Land & Buildings, (2) Manufacturing Machinery,
Plant & Equipment, and (3) Motor Vehicles.

You are concerned that the depreciation rates for Motor Vehicles may be inadequate.
You are also concerned that the recent revaluation of Freehold Land and Buildings by
20% is too high in the cu
ent economic climate.
Required:
For each management assertion listed in the table below, provide substantive audit
procedures in relation to one of the above PPE accounts that
Jun 06, 2020ACCT20075Central Queensland University
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