business-reporting-july-2010-exam-paper

She does not however have the experience to analyse

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). She does not however have the experience to analyse this data in order to identify audit risks. The engagement manager, Gary Megg, reviewed Claire’s work and sent you the following email: To: A. Senior From: Gary Megg, Engagement Manager Date: 26 July 2010 Subject: PGA audit I have been through the notes prepared by Claire. I think she has highlighted some interesting points, but she has not really analysed the data in any depth or identified key audit issues. There appear to be some financial reporting issues arising from her work which may require adjustment to the management accounts. Prior to our audit planning meeting next week I would like you to: Carry out revised analytical procedures using Claire’s data and other information provided. This work should: o identify any unusual patterns and trends in the data which may require further investigation. Show supporting calculations (where appropriate assume 360 days in a year for the purpose of computing any ratios); and o 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. Set out the financial reporting issues that arise from the above audit work with respect to the interim financial statements for the 9 months ended 30 June 2010 and are expected to arise for the year ending 30 September 2010. I do not require any detailed disclosure requirements. I do not require you to consider tax, or deferred tax, implications at this stage. Gary Requirement Respond to the engagement manager’s instructions. (25 marks)
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© The Institute of Chartered Accountants in England and Wales 2010 15 of 16 Exhibit 1 – Background information prepared by Claire Chalker PGA makes and installs two types of garage doors: Manually operated wooden doors – the “Monty”. The list price of the Monty was increased by 5% at 1 October 2009 to £840 each, including installation. An electrically operated set of metal doors with a motor – the “Gold”. The list price of the Gold was increased by 5% at 1 October 2009 to £2,520 each, including installation. Nearly all doors are made to order. Each of the two types of door is made on a separate production line at PGA’s factory in the South of England. Production equipment is specialised and highly specific to each of the separate production processes. PGA makes about 70% of its sales of both products in Germany and France where it has a network of sales offices. All selling prices are set at 1 October each year. Prices for overseas markets are fixed in euro at this time, at the equivalent of £ sterling prices. The company has had a difficult trading year so far, due to the general economic downturn. The trading performance in the year ending 30 September 2010 is thus expected to be weaker than in the previous year. In previous years, approximately equal quantities of Gold and Monty doors have been sold.
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