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You are the auditor in charge of the audit of Big Bank Plc. Two new associates who recently joined the firm have been assigned to your team, and you need to provide them on-the-job training on the audit process. The training should focus on audit evidence and testing procedures for gathering audit evidence.
Required:
a. Explain six procedures for gathering audit evidence. (6 Marks)
b. Explain to members of your team the terms “sufficient” and “appropriate” audit evidence. (2 Marks)
c. Explain four principles that an auditor uses in assessing the reliability of audit evidence in line with ISA 500. (4 Marks)
d. You have allocated the following audit areas to the two new associates on your team:
Identify the audit procedures that you will discuss with your team members for substantive testing of the audit areas mentioned above. (8 Marks)
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You are the senior responsible for planning the audit of Hometown Football Club Limited (HFC) for the year ended May 31, 2008.
HFC runs a football club which was promoted to the top division in the league this season. The football season starts on September 1 and ends on May 31 so that the players get a break over the summer months.
HFC owns their football stadium, which now has the capacity to seat 25,000 people. Of the 25,000 seats, 19,000 are allocated to HFC supporters (home supporters) and are sold to season ticket holders only. The remaining 6,000 tickets are for away supporters and cannot be sold to HFC supporters.
Season tickets cost GHS175 for children. Following their recent promotion, all the season tickets have been sold this year with 70% of season tickets sold to adults and the remaining 30% to children. Tickets for away supporters are always sold at GHS20 per ticket, regardless of whether the ticket is sold to an adult or a child. On average, 50% of away supporter tickets have been sold for each of the 14 home games played at HFC’s stadium during the football season.
HFC’s other revenue streams include the sale of football kits and other memorabilia from the club shop, and food and drink sales from the club snack bars.
Following promotion to the top division, the club added an extra stand to the stadium to increase the seating capacity to the current level of 25,000. Other existing areas of the stadium also underwent maintenance in order to restore them to their original condition. The work was carried out during June and July 2007 and cost a total of GHS3,360,000. To finance this, HFC took out a GHS2,900,000 loan on June 1, 2007. The loan carries an interest rate of 7% and is repayable over the next five years. The loan is secured on the stadium.
The directors feel that the club’s greatest assets (other than the stadium) are the football players themselves. The players have performed so well this year that some of the other football clubs in the same division have made preliminary offers to buy three of HFC’s players. HFC is particularly pleased about this as these players joined the club through their youth academy programme. Consequently, the directors would like to value these three players as intangible non-current assets in HFC’s financial statements. The players will be valued at the offer price received from the other clubs. The directors feel this is a prudent valuation because they are confident that the eventual selling price would be much higher than the preliminary offer.
One of the major drawbacks of the club’s promotion has been that the club has had to increase the level of players’ salaries. The total salary expense for the year is estimated to be in the region of GHS2,800,000. This is a particularly surprising figure as it is higher than the other operating costs for the year, which are estimated at GHS2,400,000.
HFC has just appointed a team of internal auditors. They have not been in position long enough to help you with your audit work, but the directors are keen for the internal auditors to improve the company’s internal controls in relation to the club shop and snack bars.
Required:
a) Using the information provided, describe FIVE (5) audit risks and explain the auditor’s response to each risk.
(10 marks)
b) Describe how the auditor could perform a proof in total calculation to confirm each of HFC’s revenue from ticket sales, loan interest, and payroll expense for players’ salaries.
(4 marks)
c) Explain THREE (3) internal controls the internal auditors of HFC should implement relating to the club shop or snack bars, and state the objective of each of the three controls.
(6 marks)
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Find Related Questions by Tags, levels, etc.
BYF Health Facility offers varied medical services; it is known for its high-quality laboratory services. In 2021, the company added to its laboratory services, testing for Covid-19 following the increased demand by airlines that travelers must have negative Covid-19 status either through PCR or Antigen tests. Consequently, the company recruited additional workers in the year to work in the new Covid-19 Lab on a part-time basis. All part-time employees (Locum staff) are paid based on hours worked, either on an 8-hour or 12-hour cycle.
As a precondition, part-time workers are to log in and also log out on every working day, for hours worked to be computed by the log-in device.
Bismark Appau (Bismark), a brother of the Director of Health Services of BYF Health Facility, is one of the employees who was employed on a part-time basis at the Covid-19 Lab on an 8-hour cycle. Bismark has permanent employment with KBT hospital and hardly gets time to work at the Covid-19 Lab of BYF Health Facility. However, in preparing payroll of Locum staff, the Director of Health Services continuously insists that in the case of Bismark, the full hours for the total working days in the month on the 8-hour cycle should be used, regardless of the hours he worked. Colleague workers are aware of this special treatment to Bismark, and are unhappy about this preferential treatment.
Required: i) Based on the scenario above, justify the possible ethical principles that might have been breached and its effect on productivity. (6 marks)
ii) Recommend the possible actions to be taken in dealing with this ethical dilemma. (4 marks)
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
You are the auditor in charge of the audit of Big Bank Plc. Two new associates who recently joined the firm have been assigned to your team, and you need to provide them on-the-job training on the audit process. The training should focus on audit evidence and testing procedures for gathering audit evidence.
Required:
a. Explain six procedures for gathering audit evidence. (6 Marks)
b. Explain to members of your team the terms “sufficient” and “appropriate” audit evidence. (2 Marks)
c. Explain four principles that an auditor uses in assessing the reliability of audit evidence in line with ISA 500. (4 Marks)
d. You have allocated the following audit areas to the two new associates on your team:
Identify the audit procedures that you will discuss with your team members for substantive testing of the audit areas mentioned above. (8 Marks)
Find Related Questions by Tags, levels, etc.
You are the senior responsible for planning the audit of Hometown Football Club Limited (HFC) for the year ended May 31, 2008.
HFC runs a football club which was promoted to the top division in the league this season. The football season starts on September 1 and ends on May 31 so that the players get a break over the summer months.
HFC owns their football stadium, which now has the capacity to seat 25,000 people. Of the 25,000 seats, 19,000 are allocated to HFC supporters (home supporters) and are sold to season ticket holders only. The remaining 6,000 tickets are for away supporters and cannot be sold to HFC supporters.
Season tickets cost GHS175 for children. Following their recent promotion, all the season tickets have been sold this year with 70% of season tickets sold to adults and the remaining 30% to children. Tickets for away supporters are always sold at GHS20 per ticket, regardless of whether the ticket is sold to an adult or a child. On average, 50% of away supporter tickets have been sold for each of the 14 home games played at HFC’s stadium during the football season.
HFC’s other revenue streams include the sale of football kits and other memorabilia from the club shop, and food and drink sales from the club snack bars.
Following promotion to the top division, the club added an extra stand to the stadium to increase the seating capacity to the current level of 25,000. Other existing areas of the stadium also underwent maintenance in order to restore them to their original condition. The work was carried out during June and July 2007 and cost a total of GHS3,360,000. To finance this, HFC took out a GHS2,900,000 loan on June 1, 2007. The loan carries an interest rate of 7% and is repayable over the next five years. The loan is secured on the stadium.
The directors feel that the club’s greatest assets (other than the stadium) are the football players themselves. The players have performed so well this year that some of the other football clubs in the same division have made preliminary offers to buy three of HFC’s players. HFC is particularly pleased about this as these players joined the club through their youth academy programme. Consequently, the directors would like to value these three players as intangible non-current assets in HFC’s financial statements. The players will be valued at the offer price received from the other clubs. The directors feel this is a prudent valuation because they are confident that the eventual selling price would be much higher than the preliminary offer.
One of the major drawbacks of the club’s promotion has been that the club has had to increase the level of players’ salaries. The total salary expense for the year is estimated to be in the region of GHS2,800,000. This is a particularly surprising figure as it is higher than the other operating costs for the year, which are estimated at GHS2,400,000.
HFC has just appointed a team of internal auditors. They have not been in position long enough to help you with your audit work, but the directors are keen for the internal auditors to improve the company’s internal controls in relation to the club shop and snack bars.
Required:
a) Using the information provided, describe FIVE (5) audit risks and explain the auditor’s response to each risk.
(10 marks)
b) Describe how the auditor could perform a proof in total calculation to confirm each of HFC’s revenue from ticket sales, loan interest, and payroll expense for players’ salaries.
(4 marks)
c) Explain THREE (3) internal controls the internal auditors of HFC should implement relating to the club shop or snack bars, and state the objective of each of the three controls.
(6 marks)
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
BYF Health Facility offers varied medical services; it is known for its high-quality laboratory services. In 2021, the company added to its laboratory services, testing for Covid-19 following the increased demand by airlines that travelers must have negative Covid-19 status either through PCR or Antigen tests. Consequently, the company recruited additional workers in the year to work in the new Covid-19 Lab on a part-time basis. All part-time employees (Locum staff) are paid based on hours worked, either on an 8-hour or 12-hour cycle.
As a precondition, part-time workers are to log in and also log out on every working day, for hours worked to be computed by the log-in device.
Bismark Appau (Bismark), a brother of the Director of Health Services of BYF Health Facility, is one of the employees who was employed on a part-time basis at the Covid-19 Lab on an 8-hour cycle. Bismark has permanent employment with KBT hospital and hardly gets time to work at the Covid-19 Lab of BYF Health Facility. However, in preparing payroll of Locum staff, the Director of Health Services continuously insists that in the case of Bismark, the full hours for the total working days in the month on the 8-hour cycle should be used, regardless of the hours he worked. Colleague workers are aware of this special treatment to Bismark, and are unhappy about this preferential treatment.
Required: i) Based on the scenario above, justify the possible ethical principles that might have been breached and its effect on productivity. (6 marks)
ii) Recommend the possible actions to be taken in dealing with this ethical dilemma. (4 marks)
Find Related Questions by Tags, levels, etc.
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