business-reporting-july-2010-marks-plan

To outline the audit risks that arise from the

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to outline the audit risks that arise from the patterns and trends identified in the analytical procedures and set out the audit procedures. Finally the candidate is asked to identify the financial reporting issues that arise from the audit issues identified in respect of both the 9 month interim financial statements and the full year financial statements. Available Marks Requirement Technical marks Skills marks Skills assessed 1. Carry out revised analytical procedures identifying any unusual patterns and trends in the data which may require further investigation. 7 6 Comparison of actual and imputed figures based on data provided. Use of judgement in interpreting data and offering potential reasons for variances Correct analysis and treatment of staff bonus Appropriate calculation and interpretation of working capital ratios. 2. Outline the audit risks that arise from the patterns and trends identified in the analytical procedures and set out the audit procedures you would carry out 3 3 Structuring of presentation of audit work to link into each analysis for each audit area Use of data to identify risks and identification of appropriate audit tests 3. Set out the financial reporting issues that arise from the above audit work 3 3 Identification of key financial reporting issues. Specify correct financial reporting treatment Total marks 13 12 Maximum marks 25
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TI BR – Advanced Stage – July 2010 © The Institute of Chartered Accountants in England and Wales 2010 19 To: Gary Megg, Audit Manager From: A. Senior Date: 26 July 2010 Subject: PGA audit 1. Analytical procedures 1.1 Income statement 9m to 30/6/2010 9m to 30/6/2009 Note Revenue: Monty Gold 7,500 14,000 9,600 28,800 Note 1 Cost of sales: Monty Gold (6,700) (15,500 ) (7,800) (23,400) Note 2 Gross (loss)/profit (700) 7,200 Fixed administrative and distribution costs (1,200) (1,200) Exceptional items Staff bonus scheme (450) - Note 3 (Loss)/Profit before tax (2,350) 6,000 Income tax expense 0 (1,680) (Loss)/profit for the year (2,350) 4,320 Note 1 Revenues Revenue of the Monty has declined by 21%. Revenue of the Gold has declined by 51%. The predicted values of revenue for each of the products are as calculated below. These are based on actual volumes sold (from the inventory records) x list prices. Monty 9,000 units x £840 = £7.56 m The actual revenue for sales of Monty is £7.5m which is extremely close to the predicted level and therefore provides some assurance. Gold 6,000 units x £2,520 = £15.12m The actual revenue for sales of Gold is £14m which is a difference of 8% and may represent a risk of material understatement of sales (eg through significant and inappropriate discounting of sales, or errors in recording of sales.) Audit work Verify the data provided by Claire which was used to make the predictions in the analytical procedures Agree standard prices to price lists and time of price change.
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