（d) Comment on THREE factors other than NPV that the directors of ITL should consider when

A、observe

B、comment

C、talk

D、remark

specific responsibility for undertaking annual reviews of existing clients. The following situations have arisen in

connection with three client companies:

(a) Dedza was appointed auditor and tax advisor to Kora Co, a limited liability company, last year and has recently

issued an unmodified opinion on the financial statements for the year ended 30 June 2005. To your surprise,

the tax authority has just launched an investigation into the affairs of Kora on suspicion of underdeclaring income.

(7 marks)

Required:

Identify and comment on the ethical and other professional issues raised by each of these matters and state what

action, if any, Dedza should now take.

NOTE: The mark allocation is shown against each of the three situations.

(c) Your firm has provided financial advice to the Pholey family for many years and this has sometimes involved your

firm in carrying out transactions on their behalf. The eldest son, Esau, is to take up a position as a senior

government official to a foreign country next month. (4 marks)

Required:

Identify and comment on the ethical and other professional issues raised by each of these matters and state what

action, if any, Dedza should now take.

NOTE: The mark allocation is shown against each of the three situations

(b) The chief executive of Xalam Co, an exporter of specialist equipment, has asked for advice on the accounting

treatment and disclosure of payments made for security consultancy services. The payments, which aim to

ensure that consignments are not impounded in the destination country of a major customer, may be material to

the financial statements for the year ending 30 June 2006. Xalam does not treat these payments as tax

deductible. (4 marks)

Required:

Identify and comment on the ethical and other professional issues raised by each of these matters and state what

action, if any, Dedza should now take.

NOTE: The mark allocation is shown against each of the three situations.

(c) Lamont owns a residential apartment above its head office. Until 31 December 2006 it was let for $3,000 a

month. Since 1 January 2007 it has been occupied rent-free by the senior sales executive. (6 marks)

Required:

For each of the above issues:

(i) comment on the matters that you should consider; and

(ii) state the audit evidence that you should expect to find,

in undertaking your review of the audit working papers and financial statements of Lamont Co for the year ended

31 March 2007.

NOTE: The mark allocation is shown against each of the three issues.

(c) During the year Albreda paid $0·1 million (2004 – $0·3 million) in fines and penalties relating to breaches of

health and safety regulations. These amounts have not been separately disclosed but included in cost of sales.

(5 marks)

Required:

For each of the above issues:

(i) comment on the matters that you should consider; and

(ii) state the audit evidence that you should expect to find,

in undertaking your review of the audit working papers and financial statements of Albreda Co for the year ended

30 September 2005.

NOTE: The mark allocation is shown against each of the three issues.

(c) In April 2006, Keffler was banned by the local government from emptying waste water into a river because the

water did not meet minimum standards of cleanliness. Keffler has made a provision of $0·9 million for the

technological upgrading of its water purifying process and included $45,000 for the penalties imposed in ‘other

provisions’. (5 marks)

Required:

For each of the above issues:

(i) comment on the matters that you should consider; and

(ii) state the audit evidence that you should expect to find,

in undertaking your review of the audit working papers and financial statements of Keffler Co for the year ended

31 March 2006.

NOTE: The mark allocation is shown against each of the three issues.

(b) A sale of industrial equipment to Deakin Co in May 2005 resulted in a loss on disposal of $0·3 million that has

been separately disclosed on the face of the income statement. The equipment cost $1·2 million when it was

purchased in April 1996 and was being depreciated on a straight-line basis over 20 years. (6 marks)

Required:

For each of the above issues:

(i) comment on the matters that you should consider; and

(ii) state the audit evidence that you should expect to find,

in undertaking your review of the audit working papers and financial statements of Keffler Co for the year ended

31 March 2006.

NOTE: The mark allocation is shown against each of the three issues.

(b) Historically, all owned premises have been measured at cost depreciated over 10 to 50 years. The management

board has decided to revalue these premises for the year ended 30 September 2005. At the balance sheet date

two properties had been revalued by a total of $1·7 million. Another 15 properties have since been revalued by

$5·4 million and there remain a further three properties which are expected to be revalued during 2006. A

revaluation surplus of $7·1 million has been credited to equity. (7 marks)

Required:

For each of the above issues:

(i) comment on the matters that you should consider; and

(ii) state the audit evidence that you should expect to find,

in undertaking your review of the audit working papers and financial statements of Albreda Co for the year ended

30 September 2005.

NOTE: The mark allocation is shown against each of the three issues.