Part A
From the financial statements, the management commentary in the annual report and other sources, and using appropriate auditing procedures, identify THREE areas of heightened audit risk relating to the audit of this company this year. Explain in detail, using some quantitative analysis, why you consider these to be areas of increased audit risk. (50%)
1.What does the company do and where does it do it?
2.Do the financial statements indicate any anomalies requiring further investigation?
3.Are there any ethical issues affecting this audit?
4.Are there any recent changes in the economy, the industry, or the organisation creating risks?
5.Are there any recent changes in accounting regulation affecting this company for this year?
6.What are the key problematic accounting areas for this company?
Income statement
Revenue

Co, No underlying decrease in revenue
Explain: moverment of exchange rate
Chariman’s statement —— Revenue

Audit work
Increase in revenue
in A-tha (440-380)/380=15.7% —– where devaluation is be?
83% X 53936(2013 revenue)= 44766
with 15.7% increase= 51794+9160= 60954
Effect of devaluation: 20%
Exchange rate pounds to argentine pesos
June 13: 8.2013
June 14: 13.8538
68.9%= (13.8538-8.2013)/ 8.2013
34% more than 20%

Page 41
Mobile operator services
Mobile internet services
Audit:
1.operate: contract
details of downloads
2.internet: downloads/ receipt of cash
3.test of control

Page 36
Receivable
concern 4341 June 2014
Page 37
Payable
accruals and 2829 & 4003

B: In relation to ONE of the areas selected in Part A identify in detail, and explain the reasons for, FIVE substantive audit procedures you would carry out in attempting to reduce audit risk to an acceptably low level.(50%)
Mobile Streams Sales & Receivables

Area of risk

Significant decline in revenue in s/increase in revenue in Argetina/currency devaluation
Significant year-end adjustments for both accrued and deferred income
FS assertions completeness/occurrence/classification/accuracy/cut off

Mobile internet services:
Completeness:
-Tests of controls over downloads/CAATs test packs/evaluate results
-Sampling into registers of downloads/trace through NL accounting system/tracing to cash book
-Analytical procedures: most popular downloads, reconcile total downloads to total cash received
Occurrence:
-Sampling into NL accounts, trace back to occurrence of download
-Trace back from FS figures to NLa/cs: is total in FS made up of identifiable NLa/c totals. Investigate unusual journal entries
Cut off:
-Are there any receivables/are there any unusual adjustments at year end?
Mobile Operator Sales:
-For a sample: inspect contracts between MS and mobile network/components of revenue for mobile streams/timing issues
-Commission: how do MS know how much commission they are entitled to? Detailed documentation analysing sales through mobile network.
-Fixed fee licence income: contract to cash receipt, inclusion of income in correct period
-From bank statements/cash book examine a s
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Added on 10.04.2015 10:09
Part A
From the financial statements, the management commentary in the annual report and other sources, and using appropriate auditing procedures, identify THREE areas of heightened audit risk relating to the audit of this company this year. Explain in detail, using some quantitative analysis, why you consider these to be areas of increased audit risk. (50%)
1.What does the company do and where does it do it?
2.Do the financial statements indicate any anomalies requiring further investigation?
3.Are there any ethical issues affecting this audit?
4.Are there any recent changes in the economy, the industry, or the organisation creating risks?
5.Are there any recent changes in accounting regulation affecting this company for this year?
6.What are the key problematic accounting areas for this company?
Income statement
Revenue
Co, No underlying decrease in revenue

Explain: moverment of exchange rate
Chariman”s statement —— Revenue

Audit work
Increase in revenue
in A-tha (440-380)/380=15.7% —– where devaluation is be?
83% X 53936(2013 revenue)= 44766
with 15.7% increase= 51794+9160= 60954
Effect of devaluation: 20%
Exchange rate pounds to argentine pesos
June 13: 8.2013
June 14: 13.8538
68.9%= (13.8538-8.2013)/ 8.2013
34% more than 20%

Page 41
Mobile operator services
Mobile internet services
Audit:
1.operate: contract
details of downloads
2.internet: downloads/ receipt of cash
3.test of control

Page 36
Receivable
concern 4341 June 2014
Page 37
Payable
accruals and 2829 & 4003

B: In relation to ONE of the areas selected in Part A identify in detail, and explain the reasons for, FIVE substantive audit procedures you would carry out in attempting to reduce audit risk to an acceptably low level.(50%)
Mobile Streams Sales & Receivables

Area of risk

Significant decline in revenue in s/increase in revenue in Argetina/currency devaluation
Significant year-end adjustments for both accrued and deferred income
FS assertions completeness/occurrence/classification/accuracy/cut off

Mobile internet services:Completeness:
-Tests of controls over downloads/CAATs test packs/evaluate results
-Sampling into registers of downloads/trace through NL accounting system/tracing to cash book
-Analytical procedures: most popular downloads, reconcile total downloads to total cash received
Occurrence:
-Sampling into NL accounts, trace back to occurrence of download
-Trace back from FS figures to NLa/cs: is total in FS made up of identifiable NLa/c totals. Investigate unusual journal entries
Cut off:
-Are there any receivables/are there any unusual adjustments at year end?
Mobile Operator Sales:
-For a sample: inspect contracts between MS and mobile network/components of revenue for mobile streams/timing issues
-Commission: how do MS know how much commission they are entitled to? Detailed documentation analysing sales through mobile network.
-Fixed fee licence income: contract to cash receipt, inclusion of income in correct period
-From bank statements/cash book examine a sample of large cash receipts
Accrued income:
-Examine sample of post year end receipts and confirm allocated to correct accounting period
-Examine sample of receivables, confirm receipt of cash after year end
-Debtors circularisation on a sample of Mobile network receivables
Deferred income:
-Sample into deferred income, confirm cash received, check back to contracts to identify time period covered, check calculations
Audit issues:
-Foreign exchange rates/average rates/devaluation issue
-Spanish language speakers

Auditing

Order Description
***Very important: make sure you connect the textbook materials and the professional standards with the case information. You are analyzing a specific case, not just providing general discussion of revenue recognition, fraud risk assessment, and audit procedure.***

***Access to accounting standard codification***

**Question 2 is about fraud risk assessment

1. The applicable professional standard includes
AICPA AU-C 240.02
AICPA AU-C 240.10
AICPA AU-C 240.11
2. You can also use Ch 11 materials to analyze the case
3. An overall discussion and separate analysis of the two revenue sources are expected
Question 3 is about the design of audit procedure
1. Relevant professional standard includes:
Regarding the Evaluation of Accounting Policies
PCAOB AS 5.26
PCAOB AS 12.12
PCAOB AS 12.13
PCAOB AS 12.57

Regarding Planning for Further Audit Procedures (Substantive Procedures and
Control Procedures)
PCAOB AS 12.72
PCAOB AS 12.73
PCAOB AS 12.17
PCAOB AS 13.11
PCAOB AS 13.12
AICPA AU-C 720.01
AICPA AU-C 720.06

2. An overall discussion and separate analysis of the two revenue sources are expected. You can follow this structure:
(1) Relevant audit standard
(2) General discussion about your audit procedure
(3) Specific audit procedure – audit evidence technique
***

Auditing

Order Description
***Very important: make sure you connect the textbook materials and the professional standards with the case information. You are analyzing a specific case, not just providing general discussion of revenue recognition, fraud risk assessment, and audit procedure.***

***Access to accounting standard codification***

**Question 2 is about fraud risk assessment

1. The applicable professional standard includes
AICPA AU-C 240.02
AICPA AU-C 240.10
AICPA AU-C 240.11
2. You can also use Ch 11 materials to analyze the case
3. An overall discussion and separate analysis of the two revenue sources are expected
Question 3 is about the design of audit procedure
1. Relevant professional standard includes:
Regarding the Evaluation of Accounting Policies
PCAOB AS 5.26
PCAOB AS 12.12
PCAOB AS 12.13
PCAOB AS 12.57

Regarding Planning for Further Audit Procedures (Substantive Procedures and
Control Procedures)
PCAOB AS 12.72
PCAOB AS 12.73
PCAOB AS 12.17
PCAOB AS 13.11
PCAOB AS 13.12
AICPA AU-C 720.01
AICPA AU-C 720.06

2. An overall discussion and separate analysis of the two revenue sources are expected. You can follow this structure:
(1) Relevant audit standard
(2) General discussion about your audit procedure
(3) Specific audit procedure – audit evidence technique
***