business-reporting-july-2010-exam-paper

Note assume the retail price index for october 2009

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NOTE: Assume the Retail Price Index for October 2009 was 215.
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© The Institute of Chartered Accountants in England and Wales 2010 9 of 16 3. You are an audit senior assigned to work for George Myers, an audit manager within Frensham & Waites, the firm of accountants for which you work. George has sent you the following note: Subject: Ed Holdings Ltd – Audit for the year ended 30 April 2010 Date: 26 July 2010 I have just found out that Lisa Myers, the senior on the Ed Holdings Ltd audit for the year ended 30 April 2010, has been reallocated to another urgent assignment, so I need you to help me with this audit. Ed Holdings has two wholly-owned subsidiaries. Its UK subsidiary, Aducit Ltd, was set up several years ago and supplies IT equipment and related services to schools within the UK. The second subsidiary, Bhagat Ltd, a specialist supplier of educational hardware and software based in Ruritania, was acquired on 31 October 2009. Ed Holdings took out a bank loan to help finance the acquisition of Bhagat and needs to provide the bank with audited group financial statements by 15 August 2010. Frensham & Waites audit the UK companies but Bhagat is audited by a local Ruritanian firm. We’ve received an audit clearance memorandum ( Exhibit 1 ) from the Bhagat auditors which I’ve left on your desk. I have not yet had a chance to review this. Lisa and her team have completed most of the work on Aducit and I’ve asked her to leave you a detailed list of any outstanding audit work and unresolved issues ( Exhibit 2 ). Lisa assigned the audit work on Ed Holdings and the consolidation schedules to Bill Brown. Bill has informed me that this work is complete and that he has sent you the client-prepared consolidation schedules, together with his notes ( Exhibit 3 ) and a memorandum summarising the audit work he has performed ( Exhibit 4 ). I have a meeting with the audit partner tomorrow and I need to inform her of any issues relating to the group accounts and to provide a detailed summary of the status of our work. Please review all the information provided and prepare for me a working paper for Bhagat, Aducit, Ed Holdings and the consolidation schedules: (i) Identifying and explaining any known and potential issues which you believe may give rise to material audit adjustments or significant audit risk in the group accounts. (ii) Outlining for each issue the additional audit procedures, if any, required to enable us to sign our audit opinion on the group accounts. Group materiality has been set at £150,000. George Requirement Prepare the working paper requested by George Myers. (25 marks)
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