ACCA Strategic Professional Advanced Audit and Assurance — International (AAA — INT) Practice & ¥ Revision Kit For exams in September 2024, December ~ 2024, March 2025 and June 2025 :Sateenth ection February 2022 ISAN 97815097 watS 2 (Previous ISBN 9781 5097 2707 9) S1S8N9781 5097 455 9 British Library Cataloguing in-Pubtication Dato ‘eatolague record fortis book ie ovale om the Bish brary Publiehed by 9 Leorning Modi its [BP House, Aldine Ploce 12-IMUsbriage Roos London Wi2 888 worm bop.com/iarningmed'a Printed in the United Kingdom Your lerning materi, published by BPP Leorning ‘Media Lt, ore printed on paper abtoined rom Di our tights reserved. 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The questions have been omended to reflect the current exom, Since September 2015 there have been four exam sittings per year, but ACCA only publish two ‘exams’ worth of questions per year. These releases are compiled from questions selected from the preceding sessions. These compilation exams are denoted as 'Mar/Jun’ and 'Sept/Dec' in the index below. Cerentra bat’ Plecctnay Marks | Mins | Question | Answer (eerie tains Ore een ee Peachy 1 Lark (P7 June 2012) (amended) 2 49 3 19 2 Plant (P7 December 2012) (amended) 5 49 5 12 ‘3 Monet (P7 Sep/Dec 16) (omended) 25 49 6 129 &¢ Peaches (P7 December 2009) (amended) a 49 7 13 5 Cobra (P7 Sep/Dec 17) amended) 25 49 8 138 6 Smith & Co (P7 June 2008) (omended) 5 49 ° 13 7 Viasla (P7 Mar/Jun 18) (omended) 25 4 10 "7 18 Chennai (P7 Mor/un 16) (amended) 25 rc 2 18 aad 9 Bunk (P7 June 2016) (omended) 2 @ 8 160 10 Grape (P7 December 2009) (amended) 25 9 105 11 Clean (ee 2018) (omended) 25 cs 8 m 12 Bradley 2018 Specimen) 25 6 7 13 Groom (P7 June 2018) (emended) 25 7 182 1 Raven (P7 June 2012) (amended) 25 49 8 186 18 Drogen Group (P7 June 2009) (amended) 28 9 9 m1 Iv Advanced Audit and Assurance - International (AAA — INT)erutued Aird allocation Mins | Question | Answer Peter aren en acs cue kine ues al 16 Goldfinch (P7 Sep/Dec 17) (omended) 2 ” a 196 17 Ted (P7 June 2015) (amended) 50 98 22 202 18 Francis (P7 Oecember 2014) (omended) 25 49 25 212 19 Thurman (P7 Sep/Dec 16) (amended) 25 49 26 218 20 Faster Jets (P7 December 2014) (amended) 25 49 27 224 21 Magpie (P7 June 2012) (amended) 50 ad 28 229 22 Adder (P7 June 2015) (amended) 20 a 30 237 23 Setter (P7 June 2013) (omended) 25 we 3 23 24 York (P7 Mar/Jun 16) (amended) 2 | Ww 32 27 | 25 Mondrian (P7 Sep/Dec 15) (amended) 50 8 33 252 26 Zed (P7 Sep/Dec 16) (amended) 50 8 Ky 261 27 Redback (Dec 2018) (amended) 50 8 38 an | 28 Morgot(Mar/Jun 19) (amended) 50 8 we 282 29 Cooper (P7 June 2014) (amended) 20 39 47 294 30 Grohl (P7 December 2012) (amended) ‘50 8 47 299 31 Eagle (Sep 2018) (omended) 50 98 ‘sO 308 32 Ryder (Sep/Dec 2019) (amended) 50 98 s 39 438, Sunshine (P7 Sep/Dee 17)(omended) 50 2 88 331 34 Lourel (P7 Mor/Jun 17) (omended) | so | 98 o 3H 38, Dasset (P7 December 2013) (amended) 28 co 6 382 36 wry (Mr/un 19) (omended] 28 co on 387 37 Willow (P7 December 2011 (omended) 2 % cy 308 ‘3B Yavi (P7 December2012) (omended) 28 49 o7 368 39 Jolie (P7 December 2010) (amended) 50 98 oo 372 40 Vancouver (P7 Mar/Jun 16) (amended) 50 98 72 380, 41 Adams (2018 Specimen) (amended) 50 8 75 389 42 Robster (P7 June 2U0¥) (omended) 2 Ww 78 401 43. Connolly (P7 December 2014) (mended) 50 wv | 7m | ws Question index vpend Bry Cero Marks | Mins | Question Answer Sate ann einer on) 4. Osier (P7 Mar/Jun 17) (amended) 2 wo | ot 6 45 Mocou (P7 Mar/lun 16) (mended) 28 wee 23 46 Northwest (P7 Sep/Dec 16) (amended) 25 a 428 one 47 Rope (P7 Sep/Dec 16) (amended) 8 49 86 44 48 Kandinsky (P7 Sep/Dec 15) (amended) 6 49 7 439 49 Butler (P7 June 201) (mended) 28 49 # ry 50 Yew (P7 December 2011) (amended) 25 49 a 49 S51 Fern (P7 Mar/Jun 17) (amended) S 49 92 463 52 Boston (P7 Mor/Jun 16) (omended) 25, 49 93 487 53 Coram Sep 2018) (omended) 2s 49 om 463 554 Magnolia (P7 Mar/Jun 17) (amended) 2s, we 95 409 58 Lifeson (Sep/Dec 2019) (omended) 25 49 ” 476 '56 Newman (P7 December 2010) (amended) 2s 49 9 483 57 Morr (P7 June 2014) (amended) 2 49 100 487 58 Pluto (P7 June 2009) (amended) 25, 101 491 59 Daley (Dec 2018) (omended) 25, we 102 495 {60 Bosking (P7 Sep/Dee 17) (amended) 25 Wo) 104 502 61 Hopper (P7 Sep/Deec 15) (omended) _ 25 4 108 507 62 Kilmister (Mar/Jun 19) (amended) 25 Wo | 106 512 63 Chester & Co (P7 December 2013) (amended) 2S 4107 518 64 Gillon (P7 Mar/Jun 18) (amended) 25 Ww 108 523 vi Advanced Audit and Assurance ~ International (AAA — INT)routs Ar allocation Ee etc cae Peni aes 65 Leopard (P7 Sep/Dec 17) (amended) 20 39 0 528 66 Beyer (Sep/Dec 2019) (amended) 25 49, m 534 67 Mizzen (P7 December 2013) (amended) 25 49 12 Sut (68 Jacob (P7 June 2011) (amended) 25 co 13 on? 69 Crocus 25 49, 1H 552 70 Jansen (Sep 2018) (amended) 25 49 15 556 ‘Mock exom { (March 2020 exam) (amended) Mock exam 2 (ACCA Specimen exom) Mock exam 3 (Mar/4un 2021 exam) (amended) Mock exom 4 (Sep/Dec 2021 Hybrid exam)Topic index Listed below ore the key AAA syllobus topics and the numbers of the questions in this Kit covering those topics. We have also included o reference to the relevant Chapter of the BPP AAA ‘Workbook, the companion to the BPP AAA Practice and Revision Kit. in case you wish to revise the information on the topic you have covered. If you need te concentrate your practice and revision an certain topios or if you want to attompt all available questions that refer to 0 particular subject, you will find this index useful. ae fees Wenn ‘Al: Internotional regulatory 2 1 fromeworks for audit ond ‘ossurance services ‘R2: Money foundering We). 4). 710). 146) 1 ‘83: Laws and regulations 22(b), 28(d), 3546) 1 BI: Code of Ethics for (0). 26). 3, 4(0).5, 6. (0), (0). 9. 10(0), 2 Professional Accountants | 1(0) 18(6)~(b), 21(6), 2546), 26(2). 270) 30(0), 31(2), 32(4), 33(4), 39(6), HOLA), 43(e). ‘46(0)~(), 4700), 51(0), 53(6), 60(6), 616), 63(0)-(0), 69%) 82: Fraud and error 24(0), 27(6). 6906) 3 83: Professional labiity 13) 3 ‘Cl: Quality management (fiem- | 9, 10(6), 120), 45(0). 54 % wide) C2: Advertising, tendering and | 7(c) 17(0), 396), 66(0) 5 obtaining professional work ‘ond fees C2: Professional appointments | 2(0), 15(0)-(6). 3446) 5 DI: Planning, moteriolity ond | 7(0), 17(b)=(c), 2b), 25(0). 26(0)-(b), 27(0)- 6 ‘ossessing the risk of material | (@), 28(0) 30(0), 31(a)6(¢), 32(0)-(b), 33(0)-(e) misstotement 34(0)-(6), 39(a)-(b), 40(b), 4H(0), 43(a)~(6) 02: Evidence and testing 26(6), 34(0), 40(6), 430), 60(6) 7 considerations D3: Audit procedures ond 700), 13(6). 17(6) and (d). 19, 210), 22(0), 23, 8 evidence evaluation 2500), 276), 28(6), 29(0), 30(b), 316). 32) (©), 340), 34), 35(0), 36(0), 37(0), 3910), lb), 42{o), 43(d), 440), 5110), 53(0), 54, 55(0), 59(6), 6046), 64(6)-(0) D¥eUsing the work of others 20(0), 28(¢) 7 5: Group audite 15(c), 18, 21(0), 34), 4O(6), 47, 616) 8 Fi: Subsequent avants ond going | 18(h), 47(h), (0), 69, 5AKa), 52%), 59, 68(¢) 10 2: Completion and final review | 12(b),21(c) 24(b). 29(0) 37, 38(0). 45, 46(c), 10 50(b)~(c), 53(0). 58(b), 61(c), 70(b) Advanced Audit ond Assurance - International (AAA - INT)rie ten ts. I Auditor's reports 106), 146), 47(6), 4900). 51(¢), 526), 53(0), '55(b), 56(c), 57(0), 58(0), 5%), 60(€), 61(0)- (©), 6240). 63(6), 64(b) Fl: Reports ta those charged with | A7tb), 5206). 60(0), 62(b) 1 governance and management Fi: Audit-related and assurance | 7(b), (0), 2 services F2: Specific assignments 65(0)-(b), 66, 6740), 68(0)-(b), 69, 70(6) 12,13,1% F3: The audit of social, ‘6(€) 4H(6), 56(0)=(0) 5 environmental and integrated reporting The audit of performance | 20(b). W(b)-(c), 48(6) 8 formation (pre-determined objectives) in the public sector 5: Reporting on other 64(0), 6810) 2 ‘essignments Gt: Professional and ethical (a). 36(0). 50(0) 12 developments G2: Other current issues 38(b), 5716) 6 Topic index IxThe exam Computer-based exams Strategic Professional exams are oll computer-based exams (CBE) CBE practice platform Practising as many exam-style questions a¢ possible in the ACCA CRE practice platform will be the key to passing this exam. You must do questions under timed conditions and ensure you produce full answers to the discussion parts os well as doing the calculations. Also ensure that you attempt all mack exoms under exam conditions. ACCA have lounched a free on-demand resource designed to mirror the live exam experience helping you to become more familiar with the exam format. You con access the platform via the Study Support Resources section of the ACCA website navigating to the CBE question practice section and logging in with your myACCA eredentials Approach to examining the syllabus If you are preparing to sit AAA you should pay particular attention to the following in order to ‘maximise your chonces of success. The following is taken froma recent AAA exomining teom's report. "In order to pass this exam, candidotes are required to epply the principles and rules from their earlier studies to mare complex scenarios and demonstrate their ability to handle different situations which moy orise in oudit and reloted services. In addition, candidates are expected to develop « brooder knowledge of audit services and practice menagement. Candidates should olso keep abreast of current developments and challenges in the field of both auditing and finoncial reporting to allow them to demonstrate the obility to handle these challenges in the context of auditing financial statements and os areas they may need to brief clients on. “This combination of learned knowledge and its application to complex situations requires candidates to be able to go beyond the topics os covered in text books and be able to react to the scenarios described in the requirement. Study through question practice and following developments in the field through the medio, ond through IFAC ond IAASB will be crucial in taking the learned knowledge from earlier parts of the qualification and converting into a demonstrable ability to provide audit and advisory services to clients. "AAA olso tests candidates’ ability to tallor their answer to the context in which the requirement Is written. Often the audience of the requirement will dictate the pitch ond depth of the answer along with its focus. Failure to take into account such matters will often lead to time: [pressures in the exom os condidotes lose time by detoiling knowledge thot is not relevant to the requirement. Ths is particularly noticeable in question | which is set at the planning stage of an udit ond is addressed to the senior members of the audit team, meaning an explanation of the uit risk model is not appropriate. Candidates should ollow themselves time to focus on the requirement thot is set before they begin their answers. It would be useful for candidates to visualise delivering the requirement verbally to the report recipient and therefore imagining how a partner in o firm, already qualified and experienced, would react to listening to the onswer.”Format of the exam Number of marks Section A: One compulsory question 50. Section B: Two compulsory questions (25 marks each) 50 100 The time allowed for this exam is 3 hours and 15 minutes. ‘The exomination is constructed in two sections. Questions in both sections will be largely discursive. However, candidates will be expected, for exomple, to be able to ossess materiality ond calculote relevant ratios where appropriate. Question format ‘The format of questions in AAA is slightly different between Section & and Section B. Section A questions will feature scenarios, with simple requirements such as ‘Respond to the partner's request’. or ‘Draft the briefing notes as requested’. You wil have to work out for yourself what you ‘eed to include in your onswer. Section B questions will feature requirements okin to those in your previous ACCA exams. For sittings from September 2019 onwards, all questions have been set as at the fictitious date of 1 July 20X5. As UMA is 0 Strategic Professional exom. 10 professional level marks will be awarded in Question (One, and 5 each in Questions Two and Three. Some of these should be easy to obtain. The examining team hos stated that marks may be available for presenting your answer in the form of o letter, presentation, email, report or briefing notes. You may olso be able to obtoin marks for the style and layout of your answer. Reports should always have on appropriate title. They should be formally written, with on Introductory paragraph setting out the oims of the report. You should use short paragraphs cond appropriate headings, with a summary of findings as o conclusion. ‘Memoranda and Briefing notes should have the following four things at the beginning: From: Nome of author Nome of recipient 1 July 20X5, Letters should be addressed appropriately to the correct person and be dated. They should hove @ short introductory paragraph, o conclusion and should be in a formal writing style. Letters ‘beginning with ‘Deor Sir/Madam’ should end with Yours foithfully’ BPI rot Theexom xiThis is a blank page Theexom xliQuestionsREGULATORY ENVIRONMENT AND PROFESSIONAL AND ETHICAL CONSIDERATIONS: Questions 1 to 8 cover Regulatory environment and Professional and ethical considerations, the subjects of Ports A and 6 of the BPP Workbook for AAA 1 Lark (P7 June 2012) (amended) 49 mins (@) You ore a manager in Lark & Co, responsible for the audit of Heron Co, an owner-managed business which operates a chain of bars and restaurants. This is your firm's first year ‘auditing the client and the audit for the year ended 31 March 20X2 is underway, The following exhibit, available on the left-hand side of the screen, provides information, relevant to the question: 1 Audit senior’s note for your attention. This information should be used to answer the question requirements within the response ‘option provided. Exhibit "When | wos auditing revenue I noticed something strange. Heron Co's revenue, which is ‘lmost entirely cosh-bosed, is recognised at $5.5 milion inthe droft financial statements However, the accounting system shows that tll receipts for cash paid by customers ‘amount to only $3.5 milion. This seemed odd, s0 | questioned Ava Gull, the financial controller about this. She soid that Jack Heron, the company's owner, deols with cash receipts and posts journals dealing with cash and revenue. Ava asked Jack the reason for these journals but he refused to give an explanation "While auditing cash, | noticed a payment of $2 million made by electronic transfer from the company’s bank account to on overseas financial institution. The bank statement showed that the transfer was authorised by Jack Heron, but no other documentation regarding the transfer was available. “Alarmed by the size of this transaction, and the lack of evidence to support it, | questioned Jack Heron, asking him about the source of cash receipts and the reason for electronic, transfer. He would not give any answers and became quite aggressive.’ Required Using the information contained in Exhibit 1: © Discuss the implications of the circumstances described in the audit senior's note: cond (© marks) (Explain the nature of any reporting that should take place by the audit senior. (2 marks) (©) Youre olso responsible forthe ausit of Coot Co, and you are currently reviewing the working papers ofthe audit for the year ended 28 February 20X2. In the working papers dealing with payroll, the audit junior has mode several comments. The following exhibit, available on the left-hand side ofthe screen, provides information relevant to the question: 2 Audit unior’s comments in payroll working papers. This information should be ued to answer the question raqulrement within the response option provided. Exhibit 2 "Several new employees have been added to the company's payroll during the year, with combined payments of $125,000 beeing made to them. There does nat appear to be any ‘authorisation for these additions. When | questioned the payroll supervisor who made the amendments, she said thet no authorisation was needed because the new employees are only working for the company on a temporary bosis. However, when discussing staffing Questions 3© % levels with management, it was stated that no new employees have been taken on this xyeor. Other thon the tests of controls planned, no other audit work has been performed.’ Required Using the information contained in Exhibit 2: In relotion to the audit of Coot Co's payroll, explain the meoning of the term ‘professional scepticism’, and recommend any further actions that should be taken by the auditor. (6 marks) You are also the monager responsible for the cudit of the Nossau Group, which comprises ‘@ parent campany and six subsidiaries. The audit of all individual campanias' financial statements is olmost complete, and you are currently carrying out the audit of the consolidated financial statements. One of the subsidiaries, Exuma Co, is cudited by nother firm, Jalousie & Co. Your firm has fulfilled the necessary requirements of ISA 600 Special Considerations ~ Audits of Group Financial Statements (Including the Work of Component Auditors) and is satisfied os to the competence and independence of Jolousie &Co. The following exhibit, available on the left-hand side of the screen, provides information relevant to the question: 3 Extract of Jalousie & Co's draft auditor's report on Exuma Co's financial statements. This information should be used to answer the question requirement within the response option provided Exhibit 3 "Qualified Opinion (extract) “In our opinion, except for effects of the matter described in the Basis for Quelfied Opinion poragraph, the financial statements give o true and fair view of the financial position of Exuma Co as at 31 March 20X2..." An extract of Note 12 to Exuma Co's financial statements is shown below. "Basis of Qualified Opinion (extract) “The compony is focing financiol damages of $2 milion in respect of an on-going court case, more fully explained in Note 12 to the financial statements. Management has not recognised 0 provision but hos disclosed the situation as a contingent liability. Under International Financial Reporting Standards, a provision should be made if there is an obligation os 6 result of o post event, « probable outflow of economic benefit, and a reliable estimate can be made. Audit evidence concludes that these criteria have been met, Cond itis our opinion that a provision of $2 million should be recognised. Accordingly, net profit ond shareholders’ equity would have been reduced by $2 million if the provision had been recognised.’ An extract of Note 12 to Exuma Co's financial statements is shown below. ‘Note 12 (extract) The company is the subject of o court case concerning an alleged breach of plonning regulations. The plaintiff is claiming compensation of $2 milion. The management of Exuma Co, after seeking legal advice, believe that there is only a 20% chance of o successful claim being made against the company.’ Figures extracted from the draft financial statements for the year ending 31 March 20X2 are os follows. Nassau Group Exuma Co $m $m Profit before tox 20 4 Total assets 85 20 PP Advanced Audit and Assurance — International (AAA — INT) eatenRequired the information contained in Exhibit 3: Identify and explain the matters that should be considered, and actions that should be taken by the group audit engagement team, in forming on opinion on the consolidated financial statements of the Nassau Group. (@ marks) Professional marks will be awarded for the demonstration of skil in analysis ond evaluation, and professional scepticism and judgement in your answer. (6 marks) (Total = 25 marks) 2 Plant (P7 December 2012) (amended) 49 mins (0) You are an audit manager in Weller & Co, on audit firm which operates as part of an International network of firms. This morning you received @ note from a partner regarding a potential new audit client. The following exhibit, ovallable on the left: relevant to the question: 1and side of the screen, provides information 1 Audit partner’s note regarding potential new audit client. Thi opt Exhibit 1 information should be used to answer the question requirements within the response n provided. ‘have been approached by the audit committee of the Plant Group, which operates in the mobile telecommunications sector. Our firm has been invited to tender for the audit of the individuel and group financial statements for the year ending 31 March 20X3, and | would like your help in preparing the tender document. This would be o major new client for our firm's telecoms audit department. The Plant Group comprises a parent company and six subsidiaries, one of which is located ‘overseas. The audit committee is looking for a cost effective audit, and hopes that the strength of the Plant Group's governance and internal control mean that the audit can be conducted quickly, with a proposed deadline of 31 May 20X3, The Plant Group has ‘expanded ropidly in the last few years and significant finance was raised in July 20X2 through a stock exchange listing,” Required Using the information contained in Exhibit 1: Explain why a firm of auditors may decide NOT to seek re-election as auditor. (6 marks) (i) Evaluate the specific matters to be included in the tender document for the audit of the Plant Group. 7 marks) (©) Weller & Co is facing competition from other audit firms, and the partners have been considering how the firm's revenue could be increased. Two suggestions have been made: 1 Audit partners and managers can be encouraged to sell non-audit services to audit clients by including in their remuneration package a bonus for successful sales. 2 All audit monagers should suggest to their audit clients that as well as providing the external cudit service, Weller & Co can provide the internal audit service as part of on ‘extended audit’ service. Required Comment on the ethical and professional issues raised by the suggestions to increase the firm's revenue. (B marks) Professional marks will be awarded for the demonstration of skill in analysis and evaluation, professional scepticism and judgement and commercial acumen in your answer. (5 morks) (Total = 25 marks) BPP League Questions 53 Monet (P7 Sep/Dec 2016) (amended) 49 mins You are o manager in Monet & Co, « firm of accountants which hos 12 offices and 30 portners, 10 of whom are members of ACCA. fs on expert in ethics and professional conduct, you have been cosked to advise the partners on o number issues that were roised at recent meeting. An advertisement has been drafted as part of the firm's drive to increase the number of clients. itis suggested that it should be placed in a number of quality national as well as local newspapers. Issues hove baen discovered in relation to two of the firm's audit clients, The following exhibits, available on the left-hand side of the screen, provides information relevant to the question: 1 Draft advertisement for Monet & Co firm of accountants. 2 Account of the audit of Renoir Co 3 Account of the audit of Juliet Co This information should be used to answer the question requirements wit options provided. Exhibit 1: the response Have you had enough of your accountant charging you too much for poor quality services? Does your business need o kick-start? Look no further; Monet & Co provides the most comprehensive range of finance and accountancy services in the country as well as having the leading tox team in the country who are just woiting to save you money. We are offering free business advice to all new audit clients. Drop in and see us at your local office for a free consultation, Monet & Co, Chartered Certified Accountants. Exhibit 2: ‘The planning for the audit of Renoir Co's financial statements for the year ending 31 March 20X6 will commence shortly. In preparation the audit partner telephoned Renoir Co's finance director, Jim Cassatt, to set up o planning meeting and to remind him thot fees relating to a tax engagement from the previous year were still outstanding. Mr Cossatt raised concerns about the conduct of the previous audit, stating numerous examples of when he and his staff had been Interrupted when they were busy, He stoted that he wanted guarantees that this yeor's audit will be more efficient, less intrusive and cheaper, otherwise he will seek on alternative auditor. Exhibit 3: You ore also the manager responsible for the audit of Juliet Co, and you are planning the final uit of the financial statements for the year ending 30 June 20X6. Juliet Co is a supplier of components used in the manufacture of vehicle engines. Due to « downturn in the economy, and in the automotive industry particularly, the company hos suffered a decline in sales ond profitability over the last two years, mainly due to the loss of several key customer contracts. Many of Juliet Co's non-current assets ore impoired in value, ond a significant number of receivables bolances have been written off in the last six months. In response to the deteriorating market conditions, the management of Juliet Co decided to restructure the business. The main manufecturing fociity will be reduced in size by two-thirds, ond investment will be made in new technology to make the remaining operations more efficient, ‘ond to enable the manufacture of a wider variety of components for use in different types of engines and machinery. In order to fund this restructuring, the management of Juliet Co ‘approached the company's bonk with o request for a significant loan. You are aware thot without the loan, Juliet Co is unlikely to be able to restructure successfully, which will raise significant doubt over its ability to continue as @ going concern. Your firm has been asked to advise on the necessary forecasts ond projections that the bank will need to see in order to make a decision regarding the finance requested. Management hos also requested that your firm attend a meeting with the bank at which the forecasts will be discussed. PP 6 Advanced Audit and Assurance ~ International (AAA ~ INT) asymRequired Using the information contained in Exhibit t: (©) Comment on the ethical and professional issues raised and recommend any actions necessary in response to the issues identified, (6 marks) Using the information contained in Exhibit 2: (©) Comment on the ethical and professional issues raised and recommend any actions necessary in response to the issues identified, (4 marks) Using the information contained in Exhibit 3: (©) (@ _ Identify and explain the matters that should be considered, and the principal audit procedures to be performed, in respect of the additional funding being sought. (6 marks) (@ Comment on the ethical and other implications of the request for your firm to provide advice on the forecasts ond projections, and to attend the meeting with the bank (6 marks) Professional marks will be awarded for the demonstration of skill in analysis ond evaluation, and professional scepticism and judgement in your answer. (5 marks) (Total = 25 marks) 44 Peaches (P7 December 2009) (amended) 49 mins (@) Recent surveys of the quality of audits being performed have noted that auditors too often ‘treat the requirements of the IESBA Code of Ethics and of ISAs as though they were prescriptive (rules-based) requirements, when in fact they are intended to be principles bosed. Required (Contrast the prescriptive and the principles-based approaches to auditing: and (Outline the arguments for and agoinst a prescriptive (rules-bosed) approach to auditing, (6 morks) (©) You are @ manager in the audit deportment of Peaches & Co, a firm of Chartered Certified Accountants. One of your responsibilities is to act os @ mentor to new recruits into the department. A new junior auditor, Glen Rambaran, has asked you to answer some questions which relate to issues encountered in his first few weeks working at Peaches & Co. The questions are shown below. (When i wos on my initio training course, there was a session on ethies in which the presenter talked about being intimidated by a client. | assume this does not mean physical intimidation, so what is an intimidation threat? (I know that Peaches & Co is facing competition from a new audit firm, and that our firm is advertising its services in @ national newspaper. What are the rules on advertising for new clients? (8 marks) Required For each of the questions raised, provide a response to the audit junior, in which you identify ond explain the ethical or professional issue raised. (©) You are also responsible for the audit of Adderley Co, which operates a chain of cinemas ‘across the country. Currently its cinemas are out of date, and management is planning to invest in all of its cinemas. The company has sufficient cash to fund half of the necessary capital expenditure, but has approached its bank with a loan opplication of $8 milion for the remainder of the funds required. esas Questions 7