business-reporting-july-2010-marks-plan

Professional skepticism should be adopted in respect

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Professional skepticism should be adopted in respect of any information provided to us by the client and it may therefore be inappropriate for our firm to be associated with this client in future.
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TI BR – Advanced Stage – July 2010 © The Institute of Chartered Accountants in England and Wales 2010 12 Examiner comments This question was again generally well answered with candidates adopting a structured approach to answering the question. Although this was the question where candidates were most likely not to attempt a part of the question. For example, the provision of additional information was often omitted. The VAT subsection was sometimes well answered with many candidates going beyond the requirements of the question to consider future tax planning in relation to the potential option to tax. Even if the numbers were not always correct if was pleasing to see that the issues were understood. Certain aspects of the computation were done well for example foreign currency and goodwill. The weaker candidates demonstrated poor assimilation skills in terms of not identifying opportunities for rollover relief and loss relief. Candidates were reasonably good at describing errors and saying how these should be corrected but actually redrafting the computation was sometimes beyond the weaker candidates. Performance on ethics elements of this question: A common weakness was to identify only one of the two ethical issues. Also very few candidates applied judgement to the source of the information to question the accuracy of Jim’s assertions regarding the managing director. Many candidates proposed very radical approaches to the ethical implications for the firm on the basis of unsubstantiated information. .
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TI BR – Advanced Stage – July 2010 © The Institute of Chartered Accountants in England and Wales 2010 13 BR Question 3 – Ed Holdings Scenario The candidate has recently assumed responsibility for the audit of Ed Holdings and its consolidated financial statements. Ed Holdings heads a group of companies which supply IT goods and services to the education sector. It has a tight deadline for completion of the group accounts. The audit work on the subsidiaries is largely complete and an assistant has completed work on the parent company and consolidation. The candidate is asked to brief the audit manager on the status of the audit work, issues arising and additional information required either from the client or from subsidiary auditors. This scenario tests the application of practical auditing skills to a complex scenario and includes a number of financial reporting issues, including issues associated with acquisition accounting, pensions and consolidation entries. A successful candidate will understand fully the principles and mechanics of a consolidation and be able to identify issues from the information provided. The scenario also tests the candidate’s ability to determine what is significant to a group (as opposed to an individual subsidiary) audit and to consider wider implications across the group of issues identified at a particular subsidiary. In addition, the requirement to
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