Practice - Past exams

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Số câu hỏi: 2

Thời gian làm bài: 34 phút 0 giây

Câu hỏi 1 (11 điểm):

1. June 2014 – Question 2b

You are a manager in Hunt & Co, a firm which offers a range of services to audit and non-audit clients. You have been asked to consider a potential engagement to review and provide a report on the prospective financial information of Waters Co, a company which has been an audit client of Hunt & Co for six years. The audit of the financial statements for the year ended 30 April 2014 has just commenced. Waters Co operates a chain of cinemas across the country. Currently its cinemas are out of date and use projectors which cannot show films made using new technology, which are becoming more popular. Management is planning to invest in all of its cinemas in order to attract more customers. The company has sufficient cash to fund half of the necessary capital expenditure, but has approached its bank with a loan application of $8 million for the remainder of the funds required. Most of the cash will be used to invest in equipment and fittings, such as new projectors and larger screens, enabling new technology films to be shown in all cinemas. The remaining cash will be used for refurbishment of the cinemas.

The audit strategy relevant to the audit of Waters Co concludes that the company has a relatively high risk associated with money laundering, largely due to the cash-based nature of its activities. The majority of customers purchase their cinema tickets and refreshments in cash, and the company transfers its cash to overseas bank accounts on a regular basis.

Required:

(i) Explain the stages used in laundering money, commenting on why Waters Co has been identified as high risk. (5 marks) 

(ii) Recommend FOUR elements of an anti-money laundering programme which audit firms such as Hunt & Co should have in place. (6 marks)


Câu hỏi 2 (6 điểm):

2. Dec 13 – Question 3b

Dasset Co operates in the coal mining industry. The company owns ten mines across the country from which coal is extracted before being sold onto customers who are energy providers. Coal mining companies operate under licence from the National Coal Mining Authority, an organisation which monitors the environmental impact of coal mining operations, and requires coal mines to be operated in compliance with strict health and safety regulations. You are an audit manager in Burton & Co, responsible for the audit of Dasset Co and you are reviewing the audit working papers for the year ended 31 August 2013. The draft financial statements recognise profit before tax of $18 million and total assets of $175 million. The audit senior has left a note for your attention: Accident at the Ledge Hill Mine On 15 August 2013, there was an accident at the Ledge Hill Mine, where several of the tunnels in the mine collapsed, causing other tunnels to become flooded. This has resulted in one-third of the mine becoming inaccessible and for safety reasons, the tunnels will be permanently closed. However, Dasset Co’s management thinks that the rest of the mine can remain operational, as long as improvements are made to ensure that the mine meets health and safety regulations. Luckily no one was injured in the accident. However, the collapse caused subsidence which has damaged several residential properties in a village located above the mine. A surveyor has been commissioned to report on whether the properties need to be demolished or whether they can be safely repaired. A group of 20 residents has been relocated to rental properties in the local area and Dasset Co is meeting all expenses in relation to this. The Ledge Hill Mine was acquired several years ago and is recognised in the draft statement of financial position at $10 million. As no employees were injured in the accident, Dasset Co’s management has decided not to report the accident to the National Coal Mining Authority. 

Required: In respect of the accident at the Ledge Hill Mine: 

(a) In relation to management’s decision not to report the accident to the National Coal Mining Authority, discuss Burton & Co’s responsibilities and recommend the actions which should be taken by the firm. (6 marks)




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