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business-reporting-july-2010-exam-paper

Ed holdings audit work was performed on significant

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Ed Holdings Audit work was performed on significant balances as follows: Assets £’000 Audit work performed Property, plant and equipment 45 Investments 10,010 Agreed new investment of £10 million in Bhagat to bank statement. Intercompany receivables 2,045 Agreed to consolidation schedule Cash and cash equivalents 737 Agreed bank balance to bank statement and bank confirmation letter, noting no reconciling items. Total assets 12,837 Equity and liabilities Share capital 200 Agreed to prior year financial statements. Retained earnings, brought forward 4,523 Agreed to prior year financial statements. Profit for the year 54 (See below) Long-term borrowings 8,000 Loan was taken out on 31 October 2009 to acquire the share capital of Bhagat. Agreed balance to bank confirmation letter and loan agreement, noting capital repayable over 8 years in equal annual instalments commencing 1 November 2010. Interest at 6% to be charged, payable annually in arrears. Trade and other payables 37 Current tax payable 23 Total equity and liabilities 12,837 Continued overleaf
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© The Institute of Chartered Accountants in England and Wales 2010 13 of 16 Income Statement £’000 Revenue 767 Represents management charges to other group companies all of which eliminate on consolidation Administrative expenses (740) Agreed a sample of costs to supporting documentation noting no exceptions. Most significant costs were directors' salaries and bank loan arrangement fee of £200,000. Finance income / (cost) 50 Comprises bank interest received on cash balances. Amounts appear reasonable compared to average cash balance and interest rates quoted by the bank. Profit before tax 77 Income tax expense (23) Profit for the period 54 Aducit Reconciled all balances from the consolidation schedules to the audit working papers for the company, noting no exceptions. Bhagat Reconciled all balances from the consolidation schedules to the reporting package ensuring that balances had been translated into £ sterling at appropriate exchange rates in line with group policy and IFRS. Consolidation adjustments A review of the consolidation adjustments is documented on the summarised consolidation schedules (Exhibit 3).
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© The Institute of Chartered Accountants in England and Wales 2010 14 of 16 4. Precision Garage Access plc (PGA) is a listed company which manufactures and installs garage doors for private residences. You are a senior working for PGA’s auditors and are currently supervising the planning and interim audit work for the year ending 30 September 2010. You are also carrying out a review of the interim financial statements for the 9 months to 30 June 2010. As part of the planning process, an audit junior, Claire Chalker, has completed some initial analytical procedures on the management accounts for the nine months ended 30 June 2010. She has provided some background information ( Exhibit 1 ) and set out some basic financial data and notes ( Exhibit 2 ). She does not however have the experience to analyse this data in order to identify audit
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Ed Holdings Audit work was performed on significant...

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