Audit Elective FAE 2012

thetrainee wrote: »

I def dont think its that clear cut! The third party wanted you 2 give assurance!!

Yeah but we couldn't give assurance on it. The Audit Engagement Partner deems that such requests are Agreed upon Procedures. If they wanted us to give assurance, Holiday Industries would have to hire us as auditors to audit Happy Holidays.
As it was Happy Holidays were the one to whom we were addressing the report. So no duty of care extended to Holiday Industries, hence negative assurance.

Username2011 wrote: »

thetrainee wrote: »

I def dont think its that clear cut! The third party wanted you 2 give assurance!!

Yeah but we couldn't give assurance on it. The Audit Engagement Partner deems that such requests are Agreed upon Procedures. If they wanted us to give assurance, Holiday Industries would have to hire us as auditors to audit Happy Holidays.
As it was Happy Holidays were the one to whom we were addressing the report. So no duty of care extended to Holiday Industries, hence negative assurance.

There is no negative assurance in 4400 it's a factual report

Ex 88 wrote: »

So u think assurance too? I know it's wrong but hope I get something for it because I said that the report was an assurance report

I took it up as that our client was hiring us to complete a form for a third party which required assurance the financial statements one! So I completed it as an assurance engagement, where we would have to do specific work on revenue in order to express moderate assurance on revenue! Specifically mentioning that it was not an audit opinion all over the place!

Might have been completely off the wall but that was my "opinion"

simulation 2 what were the indicators ?

I do not know to be honest !

faer2203 wrote: »

mrduffy wrote: »

simulation 2 what were the indicators ?

I got audit risks, procedures to address audit risks and opening balances procedures, dunno if thats right tho

Yep I had two indicators:
Identify the audit risks
Address the audit risks

My risks were
1. Investment property overvalued
2. Going concern
3. Highly geared
4 opening balances
5 dominant md (made a lotta assumptions here tho)

What did people do for the planning in sim 1 and then. Sim 3 in general!

notanocelot wrote: »

I thought that was brilliant!
It was gloriously straightforward! Write out bits of ISRS 4400 and M39, relating it to the case. Risks and procedures like we can do in our sleep. Sim 3 was trickier, but if you write down everything you know about bad debt provisions and management being rubbish at estimates you're basically fine.
Confused though - reporting to third parties should only be 30% of the exam and it looked like more! Not complaining though.

Well it prob was 3 indicators, as in should we accept the engagement, letter of engagement, format of report. The fourth indicator was planning. So three indicators out of a total 9 is about 1/3.

My indicators were:
.1. Acceptance considerations for agreed upon procedures
2. Letter of engagement for AUP
3. Problems with the report format and draft an appropriate one M39/ISRS4400
4. Planning considerations
5. Audit risks
6. Audit procedures to respond to assessed risk (going concern, inv property, heavily geared, prior year advisor letter of clearance, opening balances)
7. Review audit risks arising from the work paper
8. Audit procedures to be performed (roll forward to year end, sub cash testing, can't remember really)
9. Audit report impact(mine was adverse)

snipejuice wrote: »

I gave a disclaimer opinion in case 3 because
Revenue recognition - IAS 18 sales are sold on sale or return basis
Evoke - retrospect adjustment
Sharco - debtor in liquidation
all three points combined pointed to a disclaimer. any takers??????

But a disclaimer is when there's a limitation of scope which means we were unable to obtain sufficient and appropriate evidence to make an opinion on revenue, debtors and retro adjustment.
An adverse opinion means u give the opinion that they incorrectly accounted for them.
Just my tuppence worth!

Exact same as above. I was so worried I was the only one who took that approach. Mind you I threw the kitchen sink at it with regard to assumptions etc. God willing it goes ok

Hi guys been following this thread all summer but this my first ever post.Just wanted to see what indicators people got on specific sims.This is what i done/got

Sim 1- Acceptance considerations-ES5
- ES4

-Content of engagement-I just listed the contents

-Review and flaws with third party report-Certify/true and fair view

-Alternative report-Just copied the one from ISRS 4400

-Things to discuss with client to carry out engagement


Sim2-Audit Risks-Going concern
-Trade recievables
-Fair value valuation
-New property should be dealt with differently-IAS2
-Opening Balances

-Audit procedures to address above


Sim 3 This one i think i messed up

-Audit Risks-Agressive earnings management
-management estimation
-bad debts
-Mistake in previous years audit.

-Audit work on bad debt provision and reason why

-Impact audit risks have on audit report if not corrected-For this i gave a extract of two different audit reports for each scenario

Level of estimation on debtors-significant uncertainty so i put an emphasis of matter paragraph in here

Last years audit mistake-copied this straight from the Ebony question and gave a qualified except for

If i was to fall down anywhere it would be Sim 3 I didn't review Anna's worksheet because i just taught we were ment to take the audit risks from it,but i'm thinkin now maybe i should have commented on her work.

Anyone agree or disagree with above-I'm freaking out today i do not wanna have to go threw that again

The IAS 2 treatment was simply becuse we couldn't clasify them under IAS 40 because his intention was to sell them quickly and he proved this by selling one after the year end so i just seen in IAS 40 it said to classify property sold in the ordinary course of the business as stock in accordance with IAS 2. I could be well off but i took a chance.

The discussions with client i wrote very generic answer
date they need the report by
Who will be relying on it
agree fees
We need representation that we have no liability

Yea a lot easier paper compared to last years.Suprised agreed upon procedures has come up 3 years in a row.

Sim 3 when ya see the answer it'll make it look so easy but in the exam situation is was tricky. They said to prepare a Memo for Alan but who the hell was Alan there was no mention of him anywhere else in the question

Did anybody notice in Sim 1 where it was first year of audit that Gross Assets in comparative figures were above the threshold for audit exemption or did i just make this up?

Summary of IAS 40

Definition of investment property

Investment property is property (land or a building or part of a building or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both. [IAS 40.5]
Examples of investment property: [IAS 40.8]

• land held for long-term capital appreciation
• land held for undetermined future use
• building leased out under an operating lease
• vacant building held to be leased out under an operating lease
• property that is being constructed or developed for future use as investment property

The following are not investment property and, therefore, are outside the scope of IAS 40: [IAS 40.5 and 40.9]

• property held for use in the production or supply of goods or services or for administrative purposes
• property held for sale in the ordinary course of business or in the process of construction of development for such sale (IAS 2 Inventories)
• property being constructed or developed on behalf of third parties (IAS 11 Construction Contracts)
• owner-occupied property (IAS 16 Property, Plant and Equipment), including property held for future use as owner-occupied property, property held for future development and subsequent use as owner-occupied property, property occupied by employees and owner-occupied property awaiting disposal
• property leased to another entity under a finance lease

I took this up as what we were faced with so treated the apartments as stock

rustygus wrote: »

Summary of IAS 40

Definition of investment property

Investment property is property (land or a building or part of a building or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both. [IAS 40.5]
Examples of investment property: [IAS 40.8]

• land held for long-term capital appreciation
• land held for undetermined future use
• building leased out under an operating lease
• vacant building held to be leased out under an operating lease
• property that is being constructed or developed for future use as investment property

The following are not investment property and, therefore, are outside the scope of IAS 40: [IAS 40.5 and 40.9]

• property held for use in the production or supply of goods or services or for administrative purposes
• property held for sale in the ordinary course of business or in the process of construction of development for such sale (IAS 2 Inventories)
• property being constructed or developed on behalf of third parties (IAS 11 Construction Contracts)
• owner-occupied property (IAS 16 Property, Plant and Equipment), including property held for future use as owner-occupied property, property held for future development and subsequent use as owner-occupied property, property occupied by employees and owner-occupied property awaiting disposal
• property leased to another entity under a finance lease

I took this up as what we were faced with so treated the apartments as stock

What's their normal course of business? Selling properties or developing properties? .....i dont think so!

it was a property for investment purposes which he was extracting rental income from ofcourse you can sell it after some renovation and make a few bucks on it, but that doesn't class it as an inventory.

yes had he been a developer and developing properties then yes the above clause is applicable. you see that all the time in the case studies with companies whose sole business is developing properties