Briefly describe the ANY SIX (6) main contents of a letter of engagement which you should send to the directors of Aquatic Fabrications before the commencement of the audit assignment.
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The Directors of Aquatic Fabrications Ltd based in Milton Keynes have asked your firm to act as the company’s statutory auditor for the next financial year with a possibility of extension. The existing auditors - Morrison &Co – has been auditing Aquatic Fabrications for the past six years but the relations in recent years has come under strain. The Directors intend to ask Morrison & Co to resign as they say they do not provide a cost-effective service.
Required:
Briefly describe the ANY SIX (6) main contents of a letter of engagement which you should send to the directors of Aquatic Fabrications before the commencement of the audit assignment.
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- You are the audit senior responsible for the audit of Sampson Limited. You are currently planning the audit for the year ended 31 December 2019. During your initial planning meeting held with the financial controller, he told you of the following changes in the company’s operations. Due to the financial controller’s workload, the company has employed a treasurer. The financial controller is excited about the appointment because in the two months that the treasurer has been with the company, he has realized a small profit for the company through foreign-exchange transactions in dollars. explain how the components of audit risk (inherent, control or detection risk) are affected.You are the auditor of Birham Ltd and are in the process of completing the audit for the year ended 30 June 2020. There are two outstanding matters highlighted in your firm's completion documentation: (i) You have heard rumours that Birham Ltd is ready to merge with a competitor. If correct, this may have disclosure implications. Management advises you that although they have had several meetings with the competitor's management in question, no such merger is currently planned. Management has offered to make written representations confirming their intentions. (ii) The invoices to support the cost of a significant purchase of plant and machinery cannot be traced. Management has offered to make written representations confirming the cost of the plant and machinery. Required: What is the purpose of a management representation letter?You are the auditor of Birham Ltd and are in the process of completing the audit for the year ended 30 June 2020. There are two outstanding matters highlighted in your firm's completion documentation: (i) You have heard rumours that Birham Ltd is ready to merge with a competitor. If correct, this may have disclosure implications. Management advises you that although they have had several meetings with the competitor's management in question, no such merger is currently planned. Management has offered to make written representations confirming their intentions. (ii) The invoices to support the cost of a significant purchase of plant and machinery cannot be traced. Management has offered to make written representations confirming the cost of the plant and machinery. Question: Are the management's written representations sufficient to resolve the two outstanding matters noted above? Please justify your answer.
- You are the auditor of Birham Ltd and are in the process of completing the audit for the year ended 30 June 2020. There are two outstanding matters highlighted in your firm's completion documentation: (i)You have heard rumours that Birham Ltd is ready to merge with a competitor. If correct, this may have disclosure implications. Management advises you that although they have had several meetings with the competitor's management in question, no such merger is currently planned. Management has offered to make written representations confirming their intentions. (ii)The invoices to support the cost of a significant purchase of plant and machinery cannot be traced. Management has offered to make written representations confirming the cost of the plant and machinery. Required: (a) What is the purpose of a management representation letter? (b)Are the management's written representations sufficient to resolve the two outstanding matters noted above? Please justify your answerYou are the auditor of Birham Ltd and are in the process of completing the audit for the year ended 30 June 2020. There are two outstanding matters highlighted in your firm's completion documentation: (i) You have heard rumours that Birham Ltd is ready to merge with a competitor. If correct, this may have disclosure implications. Management advises you that although they have had several meetings with the competitor's management in question, no such merger is currently planned. Management has offered to make written representations confirming their intentions. (ii) The invoices to support the cost of a significant purchase of plant and machinery cannot be traced. Management has offered to make written representations confirming the cost of the plant and machinery. Required: What is the purpose of a management representation letter? Are the management's written representations sufficient to resolve the two outstanding matters noted above? Please justify your…You are the audit senior responsible for the audit of Sampson Limited. You are currently planning the audit for the financial year ended 30 June 20X9. During your initial planning meeting held with the financial controller, he told you of the following change in the company’s operations. Sampson has planned to close an inefficient factory in country New South Wales before the end of the financial year. It is expected that the redeployment and disposal of the factory’s assets will not be completed until the end of the following financial year. However, the financial controller is confident that he will be able to determine reasonably accurate closure provisions. Required: Explain how the components of audit risk (inherent, control or detection risk) are affected in this scenario.
- Assume that you are an independent auditor who runs your own auditing firm. Majan Company was your client last year who engage another independent auditor this current year because of some independence issues with your firm. Last year, you know that Majan Company was having less profit because of competition with a newly established company · the Teejan Company which -- is now selling their business. Because of this reason, Majan wants to offer to buy Teejan. Two months ago, Home Depot Company became your new client. Home Depot Company's managing director came to you to discuss that they intend to buy Teejan Company. They know that there is another company who wants to buy Teejan too, but they are not aware that it is Majan Company. They also don't know that you were Majan's previous auditor. You are aware of Majan's problems and you know it will help them to recover profits if Majan will be the one to acquire Teejan Company instead of Home Depot. Which ethical principles will be least…You are the audit senior responsible for the audit of Sampson Limited. You are currently planning the audit for the year ended 31 December 2019. During your initial planning meeting held with the financial controller, he told you of the following changes in the company’s operations. (i) Due to the financial controller’s workload, the company has employed atreasurer. The financial controller is excited about the appointment because in the two months that the treasurer has been with the company he has realized a small profit for the company through foreign-exchange transactions in dollars. (ii) Sampson has planned to close an inefficient factory in the northern partof the country before the end of 2019. It is expected that the redeploymentand disposal of the factory’s assets will not be completed until the end ofthe following year. However, the financial controller is confident that hewill be able to determine reasonably accurate closure provisions. (iii) To help achieve the budgeted…Which of the following conditions most likely would pose the greatest risk in accepting a new audit engagement?a. Staff will need to be rescheduled to cover this new client.b. There will be a client-imposed scope limitation.c. The firm will have to hire a specialist in one audit area.d. The client’s financial reporting system has been in place for 10 years.
- You are the audit senior responsible for the audit of Sampson Limited. You are currently planning theaudit for the year ended 31 December 20X7. During your initial planning meeting held with thefinancial controller, he told you of the following changes in the company’s operations.(i) Due to the financial controller’s workload, the company has employed a treasurer. The financialcontroller is excited about the appointment because in the two months that the treasurer hasbeen with the company he has realised a small profit for the company through foreign-exchangetransactions in yen.(ii) Sampson has planned to close an inefficient factory in country New South Wales before the endof 20X7. It is expected that the redeployment and disposal of the factory’s assets will not becompleted until the end of the following year. However, the financial controller is confident thathe will be able to determine reasonably accurate closure provisions.(iii) To help achieve the budgeted sales for the year,…Some members on the Audit Committee of Willow Ltd’s term will be ending in the current financial period and the board received the following nominations to replace them:1 Ms Kain, a non-executive director, who is also a material customer of Willow Ltd.2 Mrs Naidoo, who was a finance intern two (2) years ago before she left to complete her traineeship; she is now a qualified Chartered Accountant (SA).3 Mr Botha, the current finance director.4 Mrs Lang, a non-executive director on the board and a Chartered Accountant (SA) by profession.You are asked to evaluate the nominations and indicate whether the nominated individuals may be appointed to Willow Ltd’s audit committee in terms of the Companies Act.Choose the correct optionYou are the audit senior responsible for the audit of Sampson Limited. You are currently planning theaudit for the year ended 31 December 20X7. During your initial planning meeting held with thefinancial controller, he told you of the following changes in the company’s operations.(i) Due to the financial controller’s workload, the company has employed a treasurer. The financialcontroller is excited about the appointment because in the two months that the treasurer hasbeen with the company he has realised a small profit for the company through foreign-exchangetransactions in yen.(ii) Sampson has planned to close an inefficient factory in country New South Wales before the endof 20X7. It is expected that the redeployment and disposal of the factory’s assets will not becompleted until the end of the following year. However, the financial controller is confident thathe will be able to determine reasonably accurate closure provisions.(iii) To help achieve the budgeted sales for the year,…