1、2018 年 9 月 ACCA 考试 P7 高级审计与认证业务真题及答案解析(总分：100.00，做题时间：195 分钟)一、案例分析题(总题数：0，分数：0.00)Section A(总题数：1，分数：50.00)1.You are a manager in the audit department of Bison this appears totally inconsistent with the other trends noted. It could be that some costs, for example, accrued expenses, have not yet bee
2、n accounted for, or that the 20X7 figure was unusually high.Other operating incomeThere is also an audit risk that other operating income is overstated. According to the information in note 6, during the year a credit of $60 million has been recognised in profit for reversals of provisions, this is
3、50% greater than the amount recognised in the previous year. In addition, a credit of $30 million has been recognised for reversals of impairment losses. There is a risk that these figures have been manipulated in order to boost profits, as an earnings management technique, in reaction to the fall i
4、n revenue in the year.The risk of management bias is high given the listed status of the Group, hence expectations from shareholders for a positive growth trend. The profit recognised on asset disposal and the increase in foreign currency gains could also be an indication of attempts to boost operat
5、ing profit this year.Current ratio and gearingLooking at the other ratios, the current ratio and gearing ratio do not indicate audit risks; however, more detail is needed to fully conclude on the liquidity and solvency position of the Group, and whether there are any hidden trends which are obscured
6、 by the high level analysis which has been performed with the information provided.The interest cover has increased, due to both an increase in operating profit and a reduction in finance charges. This seems contradictory to the increase in borrowings of $50 million; as a result of this an increase
7、in finance charges would be expected. There is an audit risk that finance charges are understated.Effective tax rate?The effective tax rate has fallen from 25% to 199%. An audit risk arises in that the tax expense and associated liability could be understated. This could indicate management bias as
8、the financial statements suggest that accounting profit has increased, but the profit chargeable to tax used to determine the tax expense for the year appears to have decreased. There could be alternative explanations, for instance a fall in the rate of tax levied by the authorities, which will need
9、 to be investigated by the audit team.Consolidation of foreign subsidiaries?Given that the Group has many foreign subsidiaries, including the recent investment in Lynx Co, audit risks relating to their consolidation are potentially significant. Lynx Co has net assets with a fair value of $300 millio
10、n according to the goodwill calculation provided by management, representing 86% of the Groups total assets and 134% of Group net assets. This makes Lynx Co material to the Group and possibly a significant component of the Group. Audit risks relevant to Lynx Cos status as a foreign subsidiary also a
11、ttach to the Groups other foreign subsidiaries.According to IAS 21 The Effects of Changes in Foreign Exchange Rates, the assets and liabilities of Lynx Co and other foreign subsidiaries should be retranslated using the closing exchange rate. Its income and expenses should be retranslated at the exch
12、ange rates at the dates of the transactions. The risk is that incorrect exchange rates are used for the retranslations. This could result in over/understatement of the assets, liabilities, income and expenses which are consolidated, including goodwill. It would also mean that the exchange gains and
13、losses arising on retranslation and to be included in Group other comprehensive income are incorrectly determined.In addition, Lynx Co was acquired on 1 March 20X8 and its income and expenses should have been consolidated from that date. There is a risk that the full years income and expenses have b
14、een consolidated, leading to a risk of understatement of Group profit given that Lynx Co is forecast to be loss making this year, according to the audit strategy prepared by Vulture Associates.Measurement and recognition of exchange gains and losses?The calculation of exchange gains and losses can b
15、e complex, and there is a risk that it is not calculated correctly, or that some elements are omitted, for example, the exchange gain or loss on goodwill may be missed out of the calculation.IAS 21 states that exchange gains and losses arising as a result of the retranslation of the subsidiarys bala
16、nces are recognised in other comprehensive income. The risk is incorrect classification, for example, the gain or loss could be recognised incorrectly as part of profit for the year, for example, included in the $28 million foreign currency gains which form part of other operating income, which woul
17、d be incorrect. The amount recognised within other operating income has increased, as only $23 million foreign currency gains were recognised the previous year, indicating a potential risk of overstatement.Goodwill?The total goodwill recognised in the Group statement of financial position is $1,100
18、million, making it highly material at 315% of total assets.Analytical review shows that the goodwill figure has increased by $130 million during the year. The goodwill relating to the acquisition of Lynx Co is $100 million according to managements calculations. Therefore there appears to be an unexp
19、lained increase in value of goodwill of $30 million during the year and there is an audit risk that the goodwill figure is overstated, unless justified by additional acquisitions or possibly by changes in value on the retranslation of goodwill relating to foreign subsidiaries, though this latter poi
20、nt would seem unlikely given the large size of the unexplained increase in value.According to IFRS 3 Business Combinations, goodwill should be subject to an impairment review on an annual basis. Management has asserted that while they will test goodwill for impairment prior to the financial year end
21、, they do not think that any impairment will be recognised. This view is based on what could be optimistic assumptions about further growth in revenue, and it is likely that the assumptions used in managements impairment review are similarly overoptimistic. Therefore there is a risk that goodwill wi
22、ll be overstated and Group operating expenses understated if impairment losses have not been correctly determined and recognised.Initial measurement of goodwill arising on acquisition of Lynx Co?In order for goodwill to be calculated, the assets and liabilities of Lynx Co must have been identified a
23、nd measured at fair value at the date of acquisition. Risks of material misstatement arise because the various components of goodwill each have specific risks attached. The goodwill of $100 million is material to the Group, representing 29% of Group assets.A specific risk arises in relation to the f
24、air value of net assets acquired. Not all assets and liabilities may have been identified, for example, contingent liabilities and contingent assets may be omitted.A further risk relates to measurement at fair value, which is subjective and based on assumptions which may not be valid. The fair value
25、 of Lynx Cos net assets according to the goodwill calculation is $300 million, having been subject to a fair value uplift of $12 million. This was provided by an independent firm of accountants, which provides some comfort on the validity of the figure.There is also a risk that the cost of investmen
26、t is not stated correctly, for example, that the contingent consideration has not been determined on an appropriate basis. First, the interest rate used to determine the discount factor is 18% this seems high given that the Groups weighted average cost of capital is stated to be 10%. Second, the con
27、tingent consideration is only payable if Lynx Co reaches certain profit targets. Given that the company, according to Vulture Associates audit strategy, is projected to be loss making, it could be that the contingent consideration need not be recognised at all, or determined to be a lower figure tha
28、n that currently recognised, based on a lower probability of it having to be paid. The results of the analytical review have indicated that the other side of the journal entry for the contingent consideration is not described as a component of the non-current liabilities and the accounting for this
29、will need to be clarified as there is a risk that it has been recorded incorrectly, perhaps as a component of equity.Intangible assetsIn relation to expenditure on intangible assets during the year, which totals $60 million, there are several audit risks. First, there is a question over whether all
30、of this amount should have been capitalised as an intangible asset. Capitalisation is only appropriate where an asset has been created, and specifically in relation to development costs, the criteria from IAS 38 Intangible Assets must all be met. There is a risk that if any criteria have not been me
31、t, for example, if there is no probable future economic benefit from research into the new technology, then the amount should be expensed. There is a risk that intangible assets are overstated and operating expenses understated.There is also an unexplained trend, in that intangible assets has only i
32、ncreased by $30 million, yet expenditure on intangible assets, according to management information, is $60 million. More information is needed to reconcile the expenditure as stated by management to the movement in intangible assets recognised in the Group statement of financial position.Second, the
33、re is a risk that the amortisation period is not appropriate. It seems that the same useful life of 15 years has been applied to all of the different categories of intangible assets; this is not likely to be specific enough, for example, the useful life of an accounting system will not be the same a
34、s for development of robots. Fifteen years also seems to be a long period usually technology-related assets are written off over a relatively short period to take account of rapid developments in technology. In respect of amortisation periods being too long, there is a risk that intangible assets ar
35、e overstated and operating expenses understated.Detection risk in relation to Lynx Co?Lynx Co is the only subsidiary which is not audited by Bison therefore the detection risk is high in relation to Lynx Cos balances which will form part of the consolidated financial statements.(b) Principal audit p
36、rocedures on the goodwill arising on the acquisition of Lynx Co? Obtain the legal documentation pertaining to the acquisition, and review to confirm that the figures included in the goodwill calculation relating to consideration paid and payable are accurate and complete. In particular, confirm the
37、targets to be used as the basis for payment of the contingent consideration in four years time. Also confirm from the purchase documentation that the Group has obtained an 80% shareholding and that this conveys control, i.e. the shares carry voting rights and there is no restriction on the Group exe
38、rcising their control over Lynx Co. Agree the $80 million cash paid to the bank statement and cash book of the acquiring company (presumably the parent company of the Group).Review the board minutes for discussions relating to the acquisition, and for the relevant minute of board approval. For the c
39、ontingent consideration, obtain managements calculation of the present value of $271 million, and evaluate assumptions used in the calculation, in particular to consider the probability of payment by obtaining revenue and profit forecasts for Lynx Co for the next four years. Discuss with management
40、the reason for using an 18% interest rate in the calculation, asking them to justify the use of this interest rate when the Groups weighted average cost of capital is stated at 10%. Evaluate managements rationale for using the 18% interest rate, concluding as to whether it is appropriate. Confirm th
41、at the fair value of the non-controlling interest has been calculated based on an externally available share price at the date of acquisition. Agree the share price used in managements calculation to stock market records showing the share price of Lynx Co at the date of acquisition.? Obtain a copy o
42、f the due diligence report issued by Sidewinder it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation. In this case the customer has already won the action against the com
43、pany, the amount of the claim has been agreed by the courts and settlement is still outstanding at the reporting date. Hence, a provision of $12 million should be recognised on the statement of financial position.AS 37 also states that contingent assets are not recognised in financial statements sin
44、ce this may result in the recognition of income which may never be realised. However, the standard continues by stating that when the realisation of income is virtually certain, then the related asset is not a contingent asset and its recognition is appropriate. With respect to Clark Cos insurance c
45、laim therefore and the verified letter dated 25 May 20X8, the settlement of the claim as at the reporting date is virtually certain and an asset should be recognised separately on the statement of financial position.The audit supervisors proposed adjustment is correct and the finance director should
46、 therefore be requested to adjust the financial statements to include the separate recognition of the asset and the provision. If the adjustment is not made, both assets and liabilities will be materially misstated. There is no net impact on the statement of profit or loss for the year.The finance d
47、irector should also be advised that the financial statements should include full disclosure of the facts and amounts surrounding the provision for the legal claim together with full details of the expected reimbursement from the insurance company recognised as an asset.Impact on audit opinion:If the
48、 client does not make any adjustment to the financial statements, the statement of financial position is materially misstated and the audit opinion should be qualified on this basis with an except for opinion.(iii) Asset impairment?The asset impairment of $85,000 is not material in isolation to eith
49、er the statement of financial position (04% of total assets) or the statement of profit or loss for the period (37% of profit before taxation).According to IAS 36 Impairment of Assets, an entity should assess at the end of each reporting period whether there is any indication that an asset or a cash generating unit may be impaired. If any such indication exists, the entity shall estimate the recoverable amount of the asset. The standard states that potential impairment indicators include external s
