IBM认证考试
A financial institution is required to store their monthly transaction statements for 7 years. Theremust be proof that upon closure of the statements there is no alteration to the files after that date.Which of the following would the storage specialist d
题目
A financial institution is required to store their monthly transaction statements for 7 years. Theremust be proof that upon closure of the statements there is no alteration to the files after that date.Which of the following would the storage specialist discuss as a possible course of action to meetthis requirement？（）
- A、archive data to encrypted disk
- B、archive data to LTO-5 WORM media
- C、backup data todeduplicated disk pools
- D、backup data to encrypted LTO-5 using standard media
参考答案和解析
相似问题和答案
第1题：
(b) Discuss the relative costs to the preparer and benefits to the users of financial statements of increased
disclosure of information in financial statements. (14 marks)
Quality of discussion and reasoning. (2 marks)
(b) Increased information disclosure benefits users by reducing the likelihood that they will misallocate their capital. This is
obviously a direct benefit to individual users of corporate reports. The disclosure reduces the risk of misallocation of capital
by enabling users to improve their assessments of a company’s prospects. This creates three important results.
(i) Users use information disclosed to increase their investment returns and by definition support the most profitable
companies which are likely to be those that contribute most to economic growth. Thus, an important benefit of
information disclosure is that it improves the effectiveness of the investment process.
(ii) The second result lies in the effect on the liquidity of the capital markets. A more liquid market assists the effective
allocation of capital by allowing users to reallocate their capital quickly. The degree of information asymmetry between
the buyer and seller and the degree of uncertainty of the buyer and the seller will affect the liquidity of the market as
lower asymmetry and less uncertainty will increase the number of transactions and make the market more liquid.
Disclosure will affect uncertainty and information asymmetry.
(iii) Information disclosure helps users understand the risk of a prospective investment. Without any information, the user
has no way of assessing a company’s prospects. Information disclosure helps investors predict a company’s prospects.
Getting a better understanding of the true risk could lower the price of capital for the company. It is difficult to prove
however that the average cost of capital is lowered by information disclosure, even though it is logically and practically
impossible to assess a company’s risk without relevant information. Lower capital costs promote investment, which can
stimulate productivity and economic growth.
However although increased information can benefit users, there are problems of understandability and information overload.
Information disclosure provides a degree of protection to users. The benefit is fairness to users and is part of corporate
accountability to society as a whole.
The main costs to the preparer of financial statements are as follows:
(i) the cost of developing and disseminating information,
(ii) the cost of possible litigation attributable to information disclosure,
(iii) the cost of competitive disadvantage attributable to disclosure.
The costs of developing and disseminating the information include those of gathering, creating and auditing the information.
Additional costs to the preparers include training costs, changes to systems (for example on moving to IFRS), and the more
complex and the greater the information provided, the more it will cost the company.
Although litigation costs are known to arise from information disclosure, it does not follow that all information disclosure leads
to litigation costs. Cases can arise from insufficient disclosure and misleading disclosure. Only the latter is normally prompted
by the presentation of information disclosure. Fuller disclosure could lead to lower costs of litigation as the stock market would
have more realistic expectations of the company’s prospects and the discrepancy between the valuation implicit in the market
price and the valuation based on a company’s financial statements would be lower. However, litigation costs do not
necessarily increase with the extent of the disclosure. Increased disclosure could reduce litigation costs.
Disclosure could weaken a company’s ability to generate future cash flows by aiding its competitors. The effect of disclosure
on competitiveness involves benefits as well as costs. Competitive disadvantage could be created if disclosure is made relating
to strategies, plans, (for example, planned product development, new market targeting) or information about operations (for
example, production-cost figures). There is a significant difference between the purpose of disclosure to users and
competitors. The purpose of disclosure to users is to help them to estimate the amount, timing, and certainty of future cash
flows. Competitors are not trying to predict a company’s future cash flows, and information of use in that context is not
necessarily of use in obtaining competitive advantage. Overlap between information designed to meet users’ needs and
information designed to further the purposes of a competitor is often coincidental. Every company that could suffer competitive
disadvantage from disclosure could gain competitive advantage from comparable disclosure by competitors. Published figures
are often aggregated with little use to competitors.
Companies bargain with suppliers and with customers, and information disclosure could give those parties an advantage in
negotiations. In such cases, the advantage would be a cost for the disclosing entity. However, the cost would be offset
whenever information disclosure was presented by both parties, each would receive an advantage and a disadvantage.
There are other criteria to consider such as whether the information to be disclosed is about the company. This is both a
benefit and a cost criterion. Users of corporate reports need company-specific data, and it is typically more costly to obtain
and present information about matters external to the company. Additionally, consideration must be given as to whether the
company is the best source for the information. It could be inefficient for a company to obtain or develop data that other, more
expert parties could develop and present or do develop at present.
There are many benefits to information disclosure and users have unmet information needs. It cannot be known with any
certainty what the optimal disclosure level is for companies. Some companies through voluntary disclosure may have
achieved their optimal level. There are no quantitative measures of how levels of disclosure stand with respect to optimal
levels. Standard setters have to make such estimates as best they can, guided by prudence, and by what evidence of benefits
and costs they can obtain.
第2题：
8 Which of the following statements about accounting concepts and conventions are correct?
(1) The money measurement concept requires all assets and liabilities to be accounted for at historical cost.
(2) The substance over form. convention means that the economic substance of a transaction should be reflected in
the financial statements, not necessarily its legal form.
(3) The realisation concept means that profits or gains cannot normally be recognised in the income statement until
realised.
(4) The application of the prudence concept means that assets must be understated and liabilities must be overstated
in preparing financial statements.
A 1 and 3
B 2 and 3
C 2 and 4
D 1 and 4.
第3题：
(ii) The property of the former administrative centre of Tyre is owned by the company. Tyre had decided in the year
that the property was surplus to requirements and demolished the building on 10 June 2006. After demolition,
the company will have to carry out remedial environmental work, which is a legal requirement resulting from the
demolition. It was intended that the land would be sold after the remedial work had been carried out. However,
land prices are currently increasing in value and, therefore, the company has decided that it will not sell the land
immediately. Tyres uses the ‘cost model’ in IAS16 ‘Property, plant and equipment’ and has owned the property
for many years. (7 marks)
Required:
Advise the directors of Tyre on how to treat the above items in the financial statements for the year ended
31 May 2006.
(The mark allocation is shown against each of the above items)
(ii) Former administrative building
The land and buildings of the former administrative centre are accounted for as separate elements. The demolition of the
building is an indicator of the impairment of the property under IAS36. The building will not generate any future cash flows
and its recoverable amount is zero. Therefore, the carrying value of the building will be written down to zero and the loss
charged to profit or loss in the year to 31 May 2006 when the decision to demolish the building was made. The land value
will be in excess of its carrying amount as the company uses the cost model and land prices are rising. Thus no impairment
charge is recognised in respect of the land.
The demolition costs will be expensed when incurred and a provision for environmental costs recognised when an obligation
arises, i.e. in the financial year to 31 May 2007. It may be that some of these costs could be recognised as site preparation
costs and be capitalised under IAS16.
The land will not meet the criteria set out in IFRS5 ‘Non-current Assets Held for Sale and Discontinued Operations’ as a noncurrent
asset which is held for sale. IFRS5 says that a non-current asset should be classified as ‘held for sale’ if its carrying
amount will be recovered principally through a sale transaction rather than through continuing use. However, the non-current
asset must be available for immediate sale and must be actively marketed at its current fair value (amongst other criteria) and
these criteria have not been met in this case.
When the building has been demolished and the site prepared, the land could be considered to be an investment property
and accounted for under IAS40 ‘Investment Property’ where the fair value model allows gains (or losses) to be recognised inprofit or loss for the period.
第4题：
3 (a) Financial statements often contain material balances recognised at fair value. For auditors, this leads to additional
audit risk.
Required:
Discuss this statement. (7 marks)
3 Poppy Co
(a) Balances held at fair value are frequently recognised as material items in the statement of financial position. Sometimes it is
required by the financial reporting framework that the measurement of an asset or liability is at fair value, e.g. certain
categories of financial instruments, whereas it is sometimes the entity’s choice to measure an item using a fair value model
rather than a cost model, e.g. properties. It is certainly the case that many of these balances will be material, meaning that
the auditor must obtain sufficient appropriate evidence that the fair value measurement is in accordance with the
requirements of financial reporting standards. ISA 540 (Revised and Redrafted) Auditing Accounting Estimates Including Fair
Value Accounting Estimates and Related Disclosures and ISA 545 Auditing Fair Value Measurements and Disclosures
contain guidance in this area.
As part of the understanding of the entity and its environment, the auditor should gain an insight into balances that are stated
at fair value, and then assess the impact of this on the audit strategy. This will include an evaluation of the risk associated
with the balance(s) recognised at fair value.
Audit risk comprises three elements; each is discussed below in the context of whether material balances shown at fair value
will lead to increased risk for the auditor.
Inherent risk
Many measurements based on estimates, including fair value measurements, are inherently imprecise and subjective in
nature. The fair value assessment is likely to involve significant judgments, e.g. regarding market conditions, the timing of
cash flows, or the future intentions of the entity. In addition, there may be a deliberate attempt by management to manipulate
the fair value to achieve a desired aim within the financial statements, in other words to attempt some kind of window
dressing.
Many fair value estimation models are complicated, e.g. discounted cash flow techniques, or the actuarial calculations used
to determine the value of a pension fund. Any complicated calculations are relatively high risk, as difficult valuation techniques
are simply more likely to contain errors than simple valuation techniques. However, there will be some items shown at fair
value which have a low inherent risk, because the measurement of fair value may be relatively straightforward, e.g. assets
that are regularly bought and sold on open markets that provide readily available and reliable information on the market prices
at which actual exchanges occur.
In addition to the complexities discussed above, some fair value measurement techniques will contain significant
assumptions, e.g. the most appropriate discount factor to use, or judgments over the future use of an asset. Management
may not always have sufficient experience and knowledge in making these judgments.
Thus the auditor should approach some balances recognised at fair value as having a relatively high inherent risk, as their
subjective and complex nature means that the balance is prone to contain an error. However, the auditor should not just
assume that all fair value items contain high inherent risk – each balance recognised at fair value should be assessed for its
individual level of risk.
Control risk
The risk that the entity’s internal monitoring system fails to prevent and detect valuation errors needs to be assessed as part
of overall audit risk assessment. One problem is that the fair value assessment is likely to be performed once a year, outside
the normal accounting and management systems, especially where the valuation is performed by an external specialist.
Therefore, as a non-routine event, the assessment of fair value is likely not to have the same level of monitoring or controls
as a day-to-day business transaction.
However, due to the material impact of fair values on the statement of financial position, and in some circumstances on profit,
management may have made great effort to ensure that the assessment is highly monitored and controlled. It therefore could
be the case that there is extremely low control risk associated with the recognition of fair values.
Detection risk
The auditor should minimise detection risk via thorough planning and execution of audit procedures. The audit team may
lack experience in dealing with the fair value in question, and so would be unlikely to detect errors in the valuation techniques
used. Over-reliance on an external specialist could also lead to errors not being found.
Conclusion
It is true that the increasing recognition of items measured at fair value will in many cases cause the auditor to assess the
audit risk associated with the balance as high. However, it should not be assumed that every fair value item will be likely to
contain a material misstatement. The auditor must be careful to identify and respond to the level of risk for fair value items
on an individual basis to ensure that sufficient and appropriate evidence is gathered, thus reducing the audit risk to an
acceptable level.
第5题：
(b) You are the audit manager of Johnston Co, a private company. The draft consolidated financial statements for
the year ended 31 March 2006 show profit before taxation of $10·5 million (2005 – $9·4 million) and total
assets of $55·2 million (2005 – $50·7 million).
Your firm was appointed auditor of Tiltman Co when Johnston Co acquired all the shares of Tiltman Co in March
2006. Tiltman’s draft financial statements for the year ended 31 March 2006 show profit before taxation of
$0·7 million (2005 – $1·7 million) and total assets of $16·1 million (2005 – $16·6 million). The auditor’s
report on the financial statements for the year ended 31 March 2005 was unmodified.
You are currently reviewing two matters that have been left for your attention on the audit working paper files for
the year ended 31 March 2006:
(i) In December 2004 Tiltman installed a new computer system that properly quantified an overvaluation of
inventory amounting to $2·7 million. This is being written off over three years.
(ii) In May 2006, Tiltman’s head office was relocated to Johnston’s premises as part of a restructuring.
Provisions for the resulting redundancies and non-cancellable lease payments amounting to $2·3 million
have been made in the financial statements of Tiltman for the year ended 31 March 2006.
Required:
Identify and comment on the implications of these two matters for your auditor’s reports on the financial
statements of Johnston Co and Tiltman Co for the year ended 31 March 2006. (10 marks)
(b) Tiltman Co
Tiltman’s total assets at 31 March 2006 represent 29% (16·1/55·2 × 100) of Johnston’s total assets. The subsidiary is
therefore material to Johnston’s consolidated financial statements.
Tutorial note: Tiltman’s profit for the year is not relevant as the acquisition took place just before the year end and will
therefore have no impact on the consolidated income statement. Calculations of the effect on consolidated profit before
taxation are therefore inappropriate and will not be awarded marks.
(i) Inventory overvaluation
This should have been written off to the income statement in the year to 31 March 2005 and not spread over three
years (contrary to IAS 2 ‘Inventories’).
At 31 March 2006 inventory is overvalued by $0·9m. This represents all Tiltmans’s profit for the year and 5·6% of
total assets and is material. At 31 March 2005 inventory was materially overvalued by $1·8m ($1·7m reported profit
should have been a $0·1m loss).
Tutorial note: 1/3 of the overvaluation was written off in the prior period (i.e. year to 31 March 2005) instead of $2·7m.
That the prior period’s auditor’s report was unmodified means that the previous auditor concurred with an incorrect
accounting treatment (or otherwise gave an inappropriate audit opinion).
As the matter is material a prior period adjustment is required (IAS 8 ‘Accounting Policies, Changes in Accounting
Estimates and Errors’). $1·8m should be written off against opening reserves (i.e. restated as at 1 April 2005).
(ii) Restructuring provision
$2·3m expense has been charged to Tiltman’s profit and loss in arriving at a draft profit of $0·7m. This is very material.
(The provision represents 14·3% of Tiltman’s total assets and is material to the balance sheet date also.)
The provision for redundancies and onerous contracts should not have been made for the year ended 31 March 2006
unless there was a constructive obligation at the balance sheet date (IAS 37 ‘Provisions, Contingent Liabilities and
Contingent Assets’). So, unless the main features of the restructuring plan had been announced to those affected (i.e.
redundancy notifications issued to employees), the provision should be reversed. However, it should then be disclosed
as a non-adjusting post balance sheet event (IAS 10 ‘Events After the Balance Sheet Date’).
Given the short time (less than one month) between acquisition and the balance sheet it is very possible that a
constructive obligation does not arise at the balance sheet date. The relocation in May was only part of a restructuring
(and could be the first evidence that Johnston’s management has started to implement a restructuring plan).
There is a risk that goodwill on consolidation of Tiltman may be overstated in Johnston’s consolidated financial
statements. To avoid the $2·3 expense having a significant effect on post-acquisition profit (which may be negligible
due to the short time between acquisition and year end), Johnston may have recognised it as a liability in the
determination of goodwill on acquisition.
However, the execution of Tiltman’s restructuring plan, though made for the year ended 31 March 2006, was conditional
upon its acquisition by Johnston. It does not therefore represent, immediately before the business combination, a
present obligation of Johnston. Nor is it a contingent liability of Johnston immediately before the combination. Therefore
Johnston cannot recognise a liability for Tiltman’s restructuring plans as part of allocating the cost of the combination
(IFRS 3 ‘Business Combinations’).
Tiltman’s auditor’s report
The following adjustments are required to the financial statements:
■ restructuring provision, $2·3m, eliminated;
■ adequate disclosure of relocation as a non-adjusting post balance sheet event;
■ current period inventory written down by $0·9m;
■ prior period inventory (and reserves) written down by $1·8m.
Profit for the year to 31 March 2006 should be $3·9m ($0·7 + $0·9 + $2·3).
If all these adjustments are made the auditor’s report should be unmodified. Otherwise, the auditor’s report should be
qualified ‘except for’ on grounds of disagreement. If none of the adjustments are made, the qualification should still be
‘except for’ as the matters are not pervasive.
Johnston’s auditor’s report
If Tiltman’s auditor’s report is unmodified (because the required adjustments are made) the auditor’s report of Johnston
should be similarly unmodified. As Tiltman is wholly-owned by Johnston there should be no problem getting the
adjustments made.
If no adjustments were made in Tiltman’s financial statements, adjustments could be made on consolidation, if
necessary, to avoid modification of the auditor’s report on Johnston’s financial statements.
The effect of these adjustments on Tiltman’s net assets is an increase of $1·4m. Goodwill arising on consolidation (if
any) would be reduced by $1·4m. The reduction in consolidated total assets required ($0·9m + $1·4m) is therefore
the same as the reduction in consolidated total liabilities (i.e. $2·3m). $2·3m is material (4·2% consolidated total
assets). If Tiltman’s financial statements are not adjusted and no adjustments are made on consolidation, the
consolidated financial position (balance sheet) should be qualified ‘except for’. The results of operations (i.e. profit for
the period) should be unqualified (if permitted in the jurisdiction in which Johnston reports).
Adjustment in respect of the inventory valuation may not be required as Johnston should have consolidated inventory
at fair value on acquisition. In this case, consolidated total liabilities should be reduced by $2·3m and goodwill arising
on consolidation (if any) reduced by $2·3m.
Tutorial note: The effect of any possible goodwill impairment has been ignored as the subsidiary has only just been
acquired and the balance sheet date is very close to the date of acquisition.
第6题：
5 An enterprise has made a material change to an accounting policy in preparing its current financial statements.
Which of the following disclosures are required by IAS 8 Accounting policies, changes in accounting estimates
and errors in these financial statements?
1 The reasons for the change.
2 The amount of the consequent adjustment in the current period and in comparative information for prior periods.
3 An estimate of the effect of the change on future periods, where possible.
A 1 and 2 only
B 1 and 3 only
C 2 and 3 only
D All three items
第7题：
12 Which of the following statements are correct?
(1) Contingent assets are included as assets in financial statements if it is probable that they will arise.
(2) Contingent liabilities must be provided for in financial statements if it is probable that they will arise.
(3) Details of all adjusting events after the balance sheet date must be given in notes to the financial statements.
(4) Material non-adjusting events are disclosed by note in the financial statements.
A 1 and 2
B 2 and 4
C 3 and 4
D 1 and 3
第8题：
5 Financial statements have seen an increasing move towards the use of fair values in accounting. Advocates of ‘fair
value accounting’ believe that fair value is the most relevant measure for financial reporting whilst others believe that
historical cost provides a more useful measure.
Issues have been raised over the reliability and measurement of fair values, and over the nature of the current level
of disclosure in financial statements in this area.
Required:
(a) Discuss the problems associated with the reliability and measurement of fair values and the nature of any
additional disclosures which may be required if fair value accounting is to be used exclusively in corporate
reporting. (13 marks)
(a) Reliability and Measurement
Fair value can be defined as the price that would be received to sell an asset or paid to transfer a liability. The fair value can
be thought of as an ‘exit price’. A fair value measurement assumes that the transaction to sell the asset or transfer the liability
occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market
for the asset or liability which is the market in which the reporting entity would sell the asset or transfer the liability with the
price that maximises the amount that would be received or minimises the amount that would be paid. IAS39 ‘Financial
Instruments: Recognition and Measurement’ requires an entity to use the most advantageous active market in measuring the
fair value of a financial asset or liability when multiple markets exist whereas IAS41 ‘Agriculture’ requires an entity to use the
most relevant market. Thus there can be different approaches for estimating exit prices. Additionally valuation techniques and
current replacement cost could be used.
A hierarchy of fair value measurements would have to be developed in order to convey information about the nature of the
information used in creating the fair values. For example quoted prices (unadjusted) in active markets would provide better
quality information than quoted prices for similar assets and liabilities in active markets which would provide better quality
information than prices which reflect the reporting entity’s own thinking about the assumptions that market participants would
use in pricing the asset or liability. Enron made extensive use of what it called ‘mark-to-market’ accounting which was based
on valuation techniques and estimates. IFRSs currently do not have a single hierarchy that applies to all fair value measures.
Instead individual standards indicate preferences for certain inputs and measures of fair value over others, but this guidance
is not consistent among all IFRSs.
Some companies, in order to effectively manage their businesses, have already developed models for determining fair values.
Businesses manage their operations by managing risks. A risk management process often requires measurement of fair values
of contracts, financial instruments, and risk positions.
If markets were liquid and transparent for all assets and liabilities, fair value accounting clearly would give reliable information
which is useful in the decision making process. However, because many assets and liabilities do not have an active market,
the inputs and methods for estimating their fair value are more subjective and, therefore, the valuations are less reliable. Fair
value estimates can vary greatly, depending on the valuation inputs and methodology used. Where management uses
significant judgment in selecting market inputs when market prices are not available, reliability will continue to be an issue.
Management can use significant judgment in the valuation process. Management bias, whether intentional or unintentional,
may result in inappropriate fair value measurements and consequently misstatements of earnings and equity capital. Without
reliable fair value estimates, the potential for misstatements in financial statements prepared using fair value measurements
will be even greater.
Consideration must be given to revenue recognition issues in a fair value system. It must be ensured that unearned revenue
is not recognised early as it recently was by certain high-tech companies.
As the variety and complexity of financial instruments increases, so does the need for independent verification of fair value
estimates. However, verification of valuations that are not based on observable market prices is very challenging. Users of
financial statements will need to place greater emphasis on understanding how assets and liabilities are measured and how
reliable these valuations are when making decisions based on them.
Disclosure
Fair values reflect point estimates and do not result in transparent financial statements. Additional disclosures are necessary
to bring meaning to these fair value estimates. These disclosures might include key drivers affecting valuations, fair-valuerange
estimates, and confidence levels. Another important disclosure consideration relates to changes in fair value amounts.
For example, changes in fair values on securities can arise from movements in interest rates, foreign-currency rates, and credit
quality, as well as purchases and sales from the portfolio. For users to understand fair value estimates, they must be given
adequate disclosures about what factors caused the changes in fair value. It could be argued that the costs involved in
determining fair values may exceed the benefits derived therefrom. When considering how fair value information should be
presented in the financial statements, it is important to consider what type of financial information investors want. There are
indications that some investors desire both fair value information and historical cost information. One of the issues affecting
the credibility of fair value disclosures currently is that a number of companies include ‘health warnings’ with their disclosures
indicating that the information is not used by management. This language may contribute to users believing that the fair value
disclosures lack credibility.
第9题：
5 You are the audit manager for three clients of Bertie & Co, a firm of Chartered Certified Accountants. The financial
year end for each client is 30 September 2007.
You are reviewing the audit senior’s proposed audit reports for two clients, Alpha Co and Deema Co.
Alpha Co, a listed company, permanently closed several factories in May 2007, with all costs of closure finalised and
paid in August 2007. The factories all produced the same item, which contributed 10% of Alpha Co’s total revenue
for the year ended 30 September 2007 (2006 – 23%). The closure has been discussed accurately and fully in the
chairman’s statement and Directors’ Report. However, the closure is not mentioned in the notes to the financial
statements, nor separately disclosed on the financial statements.
The audit senior has proposed an unmodified audit opinion for Alpha Co as the matter has been fully addressed in
the chairman’s statement and Directors’ Report.
In October 2007 a legal claim was filed against Deema Co, a retailer of toys. The claim is from a customer who slipped
on a greasy step outside one of the retail outlets. The matter has been fully disclosed as a material contingent liability
in the notes to the financial statements, and audit working papers provide sufficient evidence that no provision is
necessary as Deema Co’s lawyers have stated in writing that the likelihood of the claim succeeding is only possible.
The amount of the claim is fixed and is adequately covered by cash resources.
The audit senior proposes that the audit opinion for Deema Co should not be qualified, but that an emphasis of matter
paragraph should be included after the audit opinion to highlight the situation.
Hugh Co was incorporated in October 2006, using a bank loan for finance. Revenue for the first year of trading is
$750,000, and there are hopes of rapid growth in the next few years. The business retails luxury hand made wooden
toys, currently in a single retail outlet. The two directors (who also own all of the shares in Hugh Co) are aware that
due to the small size of the company, the financial statements do not have to be subject to annual external audit, but
they are unsure whether there would be any benefit in a voluntary audit of the first year financial statements. The
directors are also aware that a review of the financial statements could be performed as an alternative to a full audit.
Hugh Co currently employs a part-time, part-qualified accountant, Monty Parkes, who has prepared a year end
balance sheet and income statement, and who produces summary management accounts every three months.
Required:
(a) Evaluate whether the audit senior’s proposed audit report is appropriate, and where you disagree with the
proposed report, recommend the amendment necessary to the audit report of:
(i) Alpha Co; (6 marks)
5 BERTIE & CO
(a) (i) Alpha Co
The factory closures constitute a discontinued operation per IFRS 5 Non-Current Assets Held for Sale and Discontinued
Operations, due to the discontinuance of a separate major component of the business. It is a major component due to
the 10% contribution to revenue in the year to 30 September 2007 and 23% contribution in 2006. It is a separate
business component of the company due to the factories having made only one item, indicating a separate income
generating unit.
Under IFRS 5 there must be separate disclosure on the face of the income statement of the post tax results of the
discontinued operation, and of any profit or loss resulting from the closures. The revenue and costs of the discontinued
operation should be separately disclosed either on the face of the income statement or in the notes to the financial
statements. Cash flows relating to the discontinued operation should also be separately disclosed per IAS 7 Cash Flow
Statements.
In addition, as Alpha Co is a listed company, IFRS 8 Operating Segments requires separate segmental disclosure of
discontinued operations.
Failure to disclose the above information in the financial statements is a material breach of International Accounting
Standards. The audit opinion should therefore be qualified on the grounds of disagreement on disclosure (IFRS 5,
IAS 7 and IFRS 8). The matter is material, but not pervasive, and therefore an ‘except for’ opinion should be issued.
The opinion paragraph should clearly state the reason for the disagreement, and an indication of the financial
significance of the matter.
The audit opinion relates only to the financial statements which have been audited, and the contents of the other
information (chairman’s statement and Directors’ Report) are irrelevant when deciding if the financial statements show
a true and fair view, or are fairly presented.
Tutorial note: there is no indication in the question scenario that Alpha Co is in financial or operational difficulty
therefore no marks are awarded for irrelevant discussion of going concern issues and the resultant impact on the audit
opinion.
第10题：
(b) (i) Explain the matters you should consider, and the evidence you would expect to find in respect of the
carrying value of the cost of investment of Dylan Co in the financial statements of Rosie Co; and
(7 marks)
(b) (i) Cost of investment on acquisition of Dylan Co
Matters to consider
According to the schedule provided by the client, the cost of investment comprises three elements. One matter to
consider is whether the cost of investment is complete.
It appears that no legal or professional fees have been included in the cost of investment (unless included within the
heading ‘cash consideration’). Directly attributable costs should be included per IFRS 3 Business Combinations, and
there is a risk that these costs may be expensed in error, leading to understatement of the investment.
The cash consideration of $2·5 million is the least problematical component. The only matter to consider is whether the
cash has actually been paid. Given that Dylan Co was acquired in the last month of the financial year it is possible that
the amount had not been paid before the year end, in which case the amount should be recognised as a current liability
on the statement of financial position (balance sheet). However, this seems unlikely given that normally control of an
acquired company only passes to the acquirer on cash payment.
IFRS 3 states that the cost of investment should be recognised at fair value, which means that deferred consideration
should be discounted to present value at the date of acquisition. If the consideration payable on 31 January 2009 has
not been discounted, the cost of investment, and the corresponding liability, will be overstated. It is possible that the
impact of discounting the $1·5 million payable one year after acquisition would be immaterial to the financial
statements, in which case it would be acceptable to leave the consideration at face value within the cost of investment.
Contingent consideration should be accrued if it is probable to be paid. Here the amount is payable if revenue growth
targets are achieved over the next four years. The auditor must therefore assess the probability of the targets being
achieved, using forecasts and projections of Maxwell Co’s revenue. Such information is inherently subjective, and could
have been manipulated, if prepared by the vendor of Maxwell Co, in order to secure the deal and maximise
consideration. Here it will be crucial to be sceptical when reviewing the forecasts, and the assumptions underlying the
data. The management of Rosie Co should have reached their own opinion on the probability of paying the contingent
consideration, but they may have relied heavily on information provided at the time of the acquisition.
Audit evidence
– Agreement of the monetary value and payment dates of the consideration per the client schedule to legal
documentation signed by vendor and acquirer.
– Agreement of $2·5 million paid to Rosie Co’s bank statement and cash book prior to year end. If payment occurs
after year end confirm that a current liability is recognised on the individual company and consolidated statement
of financial position (balance sheet).
– Board minutes approving the payment.
– Recomputation of discounting calculations applied to deferred and contingent consideration.
– Agreement that the discount rate used is pre-tax, and reflects current market assessment of the time value of money
(e.g. by comparison to Rosie Co’s weighted average cost of capital).
– Revenue and profit projections for the period until January 2012, checked for arithmetic accuracy.
– A review of assumptions used in the projections, and agreement that the assumptions are comparable with the
auditor’s understanding of Dylan Co’s business.
Tutorial note: As the scenario states that Chien & Co has audited Dylan Co for several years, it is reasonable to rely on
their cumulative knowledge and understanding of the business in auditing the revenue projections.