business-reporting-july-2010-exam-paper

Ii outlining for each issue the additional audit

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(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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10 of 16 Exhibit 1: Clearance from Ruritanian auditors of Bhagat From: Mersander Partners, Ruritania Date: 26 July 2010 Subject: Audit of Bhagat for the year ended 30 April 2010 To: Frensham & Waites, United Kingdom We have performed an audit of the accompanying reporting package of Bhagat for the year ended 30 April 2010 in accordance with Ruritanian Standards of Auditing and using materiality specified by you of £150,000. The reporting package has been prepared in accordance with group accounting policies as notified by Mr Ed Tyrone (Group Financial Controller). Where no group policy has been notified, the reporting package has been prepared using accounting policies consistent with those adopted in previous years. The reporting package shows profit before taxation of Bhagat of £3.985 million, an increase of 10% on the previous year. This is due to significantly higher revenues, offset by an increase in inventory obsolescence provisions when the group accounting policies were applied, and by increased contributions to the staff pension scheme following a funding review by the actuary. There is no outstanding audit work which would affect our opinion and there are no uncorrected audit adjustments. In our opinion, the reporting package of the entity has been prepared in all material respects in accordance with group accounting policies and presents fairly the results of Bhagat for the year ended 30 April 2010 and its financial position as at that date. Mersander Partners, Ruritania Exhibit 2: Aducit - List of outstanding audit work and unresolved matters provided by Lisa Myers on 23 July 2010 Review of the directors’ assessment of the company’s ability to continue as a going concern given the loss for the year, the overdraft balance and the company’s reliance on loans from other group companies. Final conclusion on the adequacy of the inventory obsolescence provision. Aducit has applied group accounting policy in determining its provision, but this is based on historical sales. Given the changes in the company’s product range and the funding pressure being experienced by a number of its customers, I am concerned that the calculated provision may be understated by around £120,000. Audit work on the provision for warranty costs of £105,000 (2009: £175,000). Receipt of bank confirmation letter. Confirmation of balances due to other group companies
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ii Outlining for each issue the additional audit procedures...

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