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Semester 1 2018 Total Marks: 60 marks and to be weighted @ 20% Length: Maximum 3,000 words Submission Requirements. This assignment may be submitted at or before 11.59pm (CST) Sunday, 6 May 2018,...

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Semester 1 2018
Total Marks: 60 marks and to be weighted @ 20%
Length: Maximum 3,000 words
Submission Requirements.
This assignment may be submitted at or before 11.59pm (CST) Sunday, 6 May 2018, Study Week 9
Assignments are to be submitted by one of the following means;
· The assignment must be lodged on or before the due date indicated in the assignment details.
· Submit your Assignment as one document, using PDF or Word doc format1 .
· The assignment must conform to the requirements set out in this assignment
· The assignment must be lodged online via the ACT303 Learnline Assignment Lodgement link on the ACT303 Learnline site.
· Ensure your file is named using a file naming convention that allows the lecturer to identify to whom it belongs. Failure to use an acceptable file naming convention may result in your assignment lodgement being rejected.
· DO NOT LODGE VIA EMAIL or FAX - assignments lodged by email or fax will not be accepted. KEEP A COPY - Ensure you have a copy of the assignment lodged.
Coversheets are no longer required.
Students will now be required to affirm at the point of submission that the work they are submitting is their original work.
This is built into the submission point.
The submission text reads as follows:
By clicking the SUBMIT button I certify that this assignment is my own work, based on my own personal study and research, and that I have acknowledged all material and sources in the preparation of this assignment, whether they be books, articles reports, lecture notes, images, videos, any other kind of document or personal communication.
I also certify that this assignment has not previously been submitted for assessment in any other course or at any other time in the same course (except as a DRAFT submission) and that I have not copied in part or whole or otherwise plagiarised the work of other students and/or persons.
I have read Charles Darwin University's Academic and Scientific Misconduct Policy (pol-001) and Student Breach of Academic Integrity Procedures http: and understand its implications.
1 Instructions for creating PDF documents and/or combining documents of different formats are provided on the Learnline site.
College of Business and Law
Semester 1 2018
Page 1 of 9
The assignment may be completed manually, or with the use of an electronic spreadsheet, word processing software or with the use of accounting software. Marks may be deducted for illegible or partially illegible papers. If completed using multiple file formats or manually, the document must be combined into one document, in PDF format2.
As a general rule resubmission of assessment items is NOT possible, however the Lecturer may ask for resubmission if it is deemed appropriate. Details for such resubmission will be made available by the Lecturer if and when the situation occurs.
Oral Test or Viva Voce
Lecturers may, at their discretion, ask students to ve
ally present their assignment submissions or rewrite some selected part/s of their answer in a controlled setting. Lecturers may exercise this discretion where they feel that the assignment was not the student’s own work.
University Plagiarism policy
Plagiarism is the unacknowledged use of material written or produced by others or a rework of your own material. All sources of information and ideas used in assignments must be referenced. This applies whether the information is from a book, journal article, the internet, or a previous essay you wrote or the assignment of a friend. Plagiarism policy is available at:
http: and Student Breach of Academic Integrity Procedures
Extensions and Late Lodgements
Exceptions will only be made where assignments are late due to special circumstances that are supported by documentary evidence, and may be subject to a penalty of 5% of assignment marks per day. Partially completed assignments will be accepted with appropriate loss of marks for the incomplete portion.
Should students foresee potential difficulties with submission of assessment items, they should contact the lecturer immediately the difficulties come to notice, to discuss suitable a
angements etc for the submission of those assessment times. An Application for Assignment Extension or Special Consideration should be completed and provided to the Head of School, School of Law and Business.
This application form, explanation and instructions is available on the ACT303 CDU Learnline course site or direct from http:
Please note that it is now Faculty policy that all extension requests must be approved by the Head of School. The lecturer is no longer able to personally approve extension requests.
Leaving a request for an extension, special assessment or special consideration until the last moment, based on grounds that students could have reasonably been able to foresee, may result in the application being rejected.
Ensure that you maintain suitable backup copies of your assignment during preparation, before completion and after lodgement. Loss of data/assignment due to failure to maintain a suitable backup will not constitute grounds for an extension.
2 Instructions for creating PDF documents and/or combining documents of different formats are provided on the Learnline site.
College of Business and Law
Semester 1 2018
Page 2 of 9
Assignment Details
Part A (20 marks)
Part A-1
You are an audit partner with Billings & Associates, a large and experienced audit firm.
You have been approached to accept the audit of Pharmaceuticals Ltd (Pharmaceuticals), a medium-sized chemical manufacturer. The manufacture of the chemicals results in highly toxic waste and Pharmaceuticals is cu
ently under investigation by the Environmental Protection Agency for a significant spill of toxic chemicals into a nea
y river. The media have reported that senior employees were allegedly involved in trying to cover up the spill.
Identify and explain the key ethical matter regarding Pharmaceuticals and its management that you should consider before making the decision to accept the engagement. (2 Marks)
Part A-2
Pharmaceuticals Ltd (Pharmaceuticals) imports a number of pharmaceutical products. In order to hedge its foreign cu
ency transactions, Pharmaceuticals entered into a number of forward rate agreements this year. Prior to this time Pharmaceuticals had had little exposure to derivative instruments, but a series of bad experiences resulting from fluctuating exchange rates convinced the company that a hedging strategy was necessary. During planning for the audit of Pharmaceuticals, the company’s hedging a
angements were identified as inherently risky and increased testing was ca
ied out in this area. A number of small e
ors were noted in accounting for hedge transactions, but there did not appear to be any material e
ors and as such no adjustments were made. A review of the audit file suggests that the e
ors noted were a result of inexperience and poor controls in the area. While all of the e
ors were
ought to the attention of the treasurer, who is responsible for the company’s hedging strategy, no further action has been taken to date.
Outline what further action the auditor should take in response to the e
ors and control weaknesses identified. Justify your response. (2 Marks)
College of Business and Law
Semester 1 2018
Page 3 of 9
Part A-3
Billings & Associates has agreed to take on a new audit client, Reaction Pty Ltd, a small garage door manufacturer that has never previously been audited. Billings & Associates has issued an engagement letter prior to commencing work for the cu
ent year. While conducting the audit, the audit team is unable to gain sufficient appropriate audit evidence around accounts receivable due to a lack of documentation. You have informed client management that you need to issue a modified auditor’s report due to the scope limitation. In response, management has requested that the engagement become a review engagement with the associated lower level of assurance, as they are not required to have an audit.
Outline the appropriate response to this situation. Provide reasons to support your response. (4 Marks)
Part A-4
Consider the following independent situations:
1. You are the auditor of Hail Pty Ltd a medium sized furniture manufacturer. Your audit firm has finalised the financial statements after the client has substantially prepared the accounting records. However, the client admits to having limited knowledge of identifying and calculating impairment and has asked for your assistance. You have proposed a number of adjustments to account for the impairment of assets.
2. You are the auditor of Travel Time Ltd, a large travel agent that also handles all your audit firms travel a
angements on normal commercial rates and provides excellent service. The managing director of Travel Time has indicated that the company is having a tough time of it due to the lack of consumer confidence in the economy at the moment and has asked if you could help by recommending their services to your other audit clients. He has said that he will understand if you are not able to do so. You happily agree to provide the recommendation, as you have always been satisfied with their service.
3. Your audit firm has been approached by a new client, Civil Constructions Ltd, to conduct the audit for the coming year. As part of your client acceptance procedures, you identify that the wife of one of the audit firm’s partners has a substantial shareholding in Civil Constructions Ltd.
4. Your audit client, Pleasure Cruises Ltd, is having cash flow problems and has not paid any of the cu
ent year’s fee by the time the auditor’s report is due to be issued. They expect business to pick up in the coming year and have requested an additional time to pay the bill.
For each of the independent situations above:
a) Identify the type of potential threat to independence. Justify your answer. (8 marks)
) Describe a safeguard, if any, which could be implemented to reduce each of the independence threats. (4 marks)
College of Business and Law
Semester 1 2018
Page 4 of 9
Part B (10 marks)
Toy Universe Pty Ltd (TUPL) is a toy manufacturer. TUPL has factories across the country and its customer base includes retailers, as well as individuals, to whom direct sales are made through their website. You are an audit senior at Harley Quinn & Associates and you are cu
ently reviewing documentation of TUPL’s internal controls in preparation for the interim audit.
TUPL’s website allows individuals to order goods directly and full payment is taken in advance. Cu
ently the website is not integrated into the inventory system and inventory levels are not checked at the time when orders are placed.
Goods are delivered via local couriers; however, the couriers do not always record customer signatures as proof that the customer has received the goods. Over the past year, there have been customer complaints about the delay between sales orders and receipt of goods. TUPL has investigated these complaints and found that, in each case, the sales order had been entered into the sales system co
Answered Same Day Apr 29, 2020 ACT303 Charles Darwin University


Pulkit answered on May 04 2020
137 Votes
Solution A
Part A-1
It is necessary to get informed about the client reputation and management integrity. The auditor required to seek the necessary information related to the business activity of the client and assess the relevant rules and regulations. There are many key factors which are required to be considered before accepting the audit engagement with the client. It includes weak accounting system, rapid employees’ turnover, bad reputation of client’s management, and the negative media comment about client.
In the given case the Pharmaceuticals Ltd a medium-sized chemical manufacturer is investigated by the environment protection agency to exhale the highly toxic waste in the nea
y river. Also the media has reported that the senior management is involved in the case. The key factor discussed above has to be considered before making the audit engagement with the Pharmaceuticals Ltd specially the bad reputation of client’s management and the negative media comment for the management of the company.
Part A-2
The auditors overall response to the assessed risk which are materially misstated and affect the financial position of the company includes emphasizing to the audit team to make the professional skepticism while doing the audit procedure. The further actions which are required to be taken by the auditor to the assessed risk (e
or and weakness found in the internal control)of the company include:
· Test operating effectiveness of the internal control system.
· Gathering and evaluating the audit evidences.
· Assigning risky task to experienced staff.
· Used Specialization while performing audit.
· Performing substantive audit procedure.
· Check for the relevant documents are provided or not.
These are the general procedure has to applied on the hedge transactions of Pharmaceuticals Ltd also further auditor has to make change in the nature time and extent of audit procedure to be performed like substantive audit procedure has to be performed at the end of period instead of interim date.
Part A-3
While conducting the audit of the Reaction Pty Ltd the audit team noticed that there is no audit documents were available due to which the auditor is not able to obtain sufficient and appropriate document necessary for completion of audit. The management of the Reaction Pty Ltd has requested the audit team to limit the scope of their audit because they are not liable to get their accounts audited under any statute and not to modify their audit report.
The auditor has not to accept the proposal of the management which limit the scope of the audit and the requirement of conducting an audit is a different matter and there is no provision available in the auditing standards to low the assurance of the audit just because an audit is conducted voluntarily by the company and audit not mandatory to the company. so the auditor has either to reject the modified audit engagement or to perform the audit according to the statutory requirement and issue a modified report to the management.
Part A-4
In the first case where the auditor of Hail Pty Ltd is providing the accounting services related to the adjustment of impairment of assets. As the audit firm is providing the further services apart from auditing and reviewing the task performed by them is difficult or can say not possible and due to which the threat involve in this case is a Self-review threat.    
In the second case the audit firm is also getting the services of its client Travel Time Ltd which is a large travel agent and during the tough time the manager of the Travel Time Ltd has requested the auditor to help them by promoting the business of Travel Time Ltd by giving the recommendation to its other audit clients. Self-interest threat is involved in this case because the company is also getting the travel a
angements and other services in the excellent manner from the Travel Time Ltd and their own interest is emerging with them by recommending the other.
In the third case the audit firm is approaches to an new client Civil Constructions Ltd and the wife of one of the partner of the audit firm is holding a substantial share in the Civil Constructions Ltd. In this the auditors independence is affecting by the threat of relationship of the partner of the audit firm and the substantial shareholder of the Civil Constructions we can say that it involve the Relationships threat.
In the fourth case a one of the client of audit firm is not able to pay to the firm for the audit conduct by the auditor during the period due to the cash flow problems and requested the audit firm to give additional time for the...

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