问题详情

SectionB–TWOquestionsONLYtobeattempted
(a)AccordingtoISA240TheAuditor’sResponsibilitiesRelatingtoFraudinanAuditofFinancialStatements:
‘Whenidentifyingandassessingtherisksofmaterialmisstatementduetofraud,theauditorshall,basedonapresumptionthattherearerisksoffraudinrevenuerecognition,evaluatewhichtypesofrevenue,revenuetransactionsorassertionsgiverisetosuchrisks.’
Required:
DiscusswhytheauditorshouldpresumethattherearerisksoffraudinrevenuerecognitionandwhyISA240requiresspecificauditorresponsesinrelationtotherisksidentified.(7marks)
(b)YouarethemanagerresponsiblefortheauditofYorkCo,achainofhealthandleisureclubsownedandmanagedbyentrepreneurPhilSmith.Theauditfortheyearended30November2015isnearingcompletionandthedraftfinancialstatementsrecognisetotalassetsof$27millionandprofitbeforetaxof$2·2million.Theauditseniorhasleftthefollowingfilenotesforyourconsiderationduringyourreviewoftheauditworkingpapers:
(i)Cashtransfers
Duringareviewofthecashbook,areceiptof$350,000wasidentifiedwhichwasaccompaniedbythedescription‘BD’.Bankstatementsshowedthatthefollowingdayanearlyidenticalamountwastransferredintoabankaccountheldinaforeigncountry.WhenIaskedthefinancialcontrolleraboutthis,sherequestedthatIspeaktoMrSmith,ashehassoleresponsibilityforcashmanagement.AccordingtoMrSmith,anoldfriendofhis,BrianDavies,hasloanedthemoneytothecompanytofundfurtherexpansionandthemoneyhasbeeninvesteduntilitisneeded.DocumentaryevidenceconcerningthetransactionhasbeenrequestedfromMrSmithbuthasnotyetbeenreceived.(7marks)
(ii)Legaldispute
AttheyearendYorkCoreversedaprovisionrelatingtoanongoinglegaldisputewithanex-employeewhowasclaiming$150,000forunfairdismissal.Thisamountwasprovidedinfullinthefinancialstatementsfortheyearended30November2014buthasnowbeenreversedbecauseMrSmithbelievesitisnowlikelythatYorkCowillsuccessfullydefendthelegalcase.MrSmithhasnotbeenavailabletodiscussthismatterandnoadditionaldocumentaryevidencehasbeenmadeavailablesincetheendofthepreviousyear’saudit.Theauditreportwasunmodifiedinthepreviousyear.(6marks)
Required:
Evaluatetheimplicationsforthecompletionoftheaudit,recommendinganyfurtheractionswhichshouldbetakenbyyourauditfirm.
Note:Thesplitofthemarkallocationisshownagainsteachoftheissuesabove.


请帮忙给出正确答案和分析，谢谢！