Monitoring Test MT1A

Audit and Assurance

(International)
F8AA-MT1A-X08-Q

Time allowed 1.5 hours

All FOUR questions are compulsory and MUST be attempted.

Do NOT open this paper until instructed by the supervisor.

Accountancy Tuition Centre Ltd

ATC
INTERNATIONAL
1 You are an audit partner in Future & Co, a firm of certified accountants. You have recently
been approached by the directors of Clover, a multi-national listed company, who wish to
appoint your firm as auditors of the company. The existing auditors, Past & Co, are resigning
at the request of the directors.

Required:

Describe the ethical and practical matters which you would consider prior to accepting
appointment as external auditor of Clover.
(9 marks)

2 Your firm has recently been appointed as auditor of Edco, a privately owned hotel, and you
are to be the senior in charge of the audit. Your firm is not familiar with the hotel industry.
The hotel has:

(1) bedrooms, 25 of which are single

(2) conference centre facilities
(3) two restaurants and a bar, which are also open to non-residents.

A variety of discounts are offered to customers depending on the type of customer (eg
conference, business or private) and the time of week or year. The management has sought to
increase the room occupancy of the hotel in recent years by offering weekend discounts to
tourists.

The hotel has recently experienced difficulty in retaining staff and, consequently, both staff
turnover and the numbers of part-time staff employed are high.

All bookings and accounting transactions are maintained on two microcomputers, one of
which is kept in reception and the other in the administration office. The bar and restaurants
record transactions on electronic tills.

Required:

(a) Describe basic sources of information you would find useful when familiarising
yourself with the nature of business in which Edco is involved. (5 marks)

(b) Describe the possible assertions risk areas within Edco (eg consider inherent
risk and control risk as defined within ISA 200). (9 marks)

(c) List the internal control objectives of Edco in respect of:

(i) room lettings; and

(ii) part-time employee wages. (6 marks)

(20 marks)

Accountancy Tuition Centre (International Holdings) Ltd 2008 2

3 You are the audit client partner for Excelm Plc, a listed company. A requirement of the
legislative environment under which the company operates, is that all listed companies must
have an operative audit committee of at least three independent members. Excelms audit
committee has been in operation for three years.

Required:

(a) Briefly explain FIVE responsibilities of the audit committee. (5 marks)

(b) Explain the communications you will have with the audit committee at various
stages throughout the audit process. (7 marks)

(12 marks)

4 When obtaining audit evidence from substantive procedures, the auditor should consider the
sufficiency and appropriateness of audit evidence from such procedures together with any
evidence from tests of control to support financial statement assertions ...
ISA 500 Audit evidence
Required:

Discuss the extent to which each of the following sources of audit evidence is sufficient
and appropriate:

(i) initials on a grid stamp for quantity, price and extensions on purchase invoices

(ii) year-end bank report for audit purposes

(iii) comparison of weekly till rolls (of a cash register) and cash bankings (ie paid
into a bank account).
(9 marks)

End of Question Paper

Accountancy Tuition Centre (International Holdings) Ltd 2008 3