UNIVERSITY OF LONDON
AC3093 ZB (279 0093)
BSc Degrees and Diplomas for Graduates in Economics, Management, Finance and the Social Sciences, the Diplomas in Economics and Social Sciences and Access Route
Auditing and Assurance
Friday, 18 May 2012 : 10.00am to 1.00pm
Candidates should answer FOUR of the following EIGHT questions: TWO from Section A, ONE from Section B and ONE further question from either section. All questions carry equal marks.
© University of London 2012 UL12/0010
PLEASE TURN OVER Page 1 of 6
SECTION A Answer TWO questions from this section and not more than one further question. (You are reminded that four questions in total are to be attempted with at least one from Section B.)
You have just been approached by the newly-appointed Senior Regulator for the financial services (including accounting and auditing) industry in a country which has previously had little or no regulation on the provision of financial information. The Regulator has said that his first priority is to improve the quality of annual financial statements which the major companies in the country publish. The Regulator has established working parties to examine improvements in the quality of accounting and financial reporting practices. Another working party has been established to examine the quality of audit field work. The Regulator tells you that he wants your working party to put forward proposals which will improve the quality of audit reporting. He is concerned that present practices allow individual auditors to report in their own way. This has led to confusion, since there are so many different styles of audit report. The Regulator believes that a standardised approach will reduce this confusion. He is aware that there are international auditing standards on auditing and asks you to examine the possibility of adopting an approach consistent with the international standards. He asks you to look at the following specific aspects of audit reporting: • To whom the audit report is addressed • A reference to the framework of accounting • A reference to the framework of auditing • Some discussion of what can be and what cannot be expected from an audit • The style of opinion on the financial statements, and • Any other issues you think might be relevant. Required (a) (b) Draft a report from your working party on the specific issues mentioned above. (15 marks)
Draft an appendix to this report setting out the advantages and disadvantages of a standardised approach to audit reporting. (10 marks)
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You are the audit partner of Lottolife, a leisure establishment which includes a bar and a restaurant open to the general public. The management consists of a senior manager and three assistant managers; all four are paid a salary with a profit-related bonus. Both the bar and the restaurant are dependent on casual workers who are paid an hourly rate in cash at the end of the week. To record the hours worked, each employee has to ‘clock in and clock out’ using a clock card inserted into a machine which records the time in and out. There is no other check on the accuracy of the recorded hours. Workers are hired after a short interview by one of the assistant managers who completes a form to record the details of the successful applicant. The company has a poor reputation as an employer and expects its staff to work long hours. Consequently employees tend not to stay very long. On resigning, an employee has to sign a form which is endorsed by the assistant manager and is then handed to the Payroll Department so that the employee’s last pay packet can be made up and the employee taken off the payroll. There are never enough applicants to fill the vacancies and almost no applicant is rejected. Both pay and staff morale are low. In an attempt to boost the pay and attract more and better staff, one of the...