ISA 560 revision question (NBAA, C2, NOV 2018)

Related parties are those parties considered to be related if one party has the ability to control or exercise significant influence over the other party in making financial decisions. In the context of above, a related party could be management, owner or any person who is in a position to influence an entity’s operating policies and financial decisions.
Spread the love

(a) Briefly describe different models in which internal audit services could be delivered.

(b) MONO is a listed Construction Company based in the north of the country, whose activities encompass house building and development. Its annual revenue is TZS.550 million and profit before tax is TZS.70 million.

You are the audit senior involved with the audit of MONO for the year ended 31st December 2017. The following matters have come to your attention during the review stage of the audit in April 2018. 1.

Customer going into liquidation

One of MONO’s major commercial customers has gone into liquidation shortly after the year-end. As at the year-end, the customer owed the company TZS7.5 million.

Claim for unfair dismissal

One of the company’s construction workers, Mwakaje Njeri, was dismissed in November 2017 after turning up to work in a drunk condition. In December 2017, Mr. Njeri opened a case against the company for unfair dismissal. Lawyers of the company have advised that it is very unlikely that he will be successful in his claim.

In March 2018, a fire started as a result of vandalism at one of the company’s ten storage depots. The fire destroyed TZS.200 million worth of building materials.

REQUIRED:

For each of the three above mentioned events at MONO:

(i) Describe additional audit procedures you will carry out.
(ii) State whether the accounts will need to be amended and explain your reasoning.
(iii) Discuss its potential impact on the audit report, fully explaining your answers.

Author: amidu edson

I am certified accountant with more than 5 years of teaching experience. Currently am teaching auditing and assurance, management accounting and financial accounting for student preparing for professional exams such as ACCA and CPA.

Leave a Reply