WGU AFT2 TASK 1 ACCREDITATION AUDIT
FULLY SOLVED TASK PAPER GRADED A+
◉ Client is overseas.
Answer: Firm needs to consider whether it has sufficient staff to
send overseas or have its own overseas office.
Issue may arise with language barriers and consideration may have
to be given to using overseas auditors
◉ specific industry.
Answer: Firm needs to consider whether it has sufficient experience
of the industry to carry out the audit work
◉ timing of audit.
Answer: protect audit quality
◉ conflict of interest.
Answer: check with other clients
◉ incoming auditor.
Answer: why did the old auditor leave
,◉ overdraft review is due and possibility of facility being
withdrawn.
Answer: Inspect borrowing agreements and ensure that the
company is able to comply with any terms and conditions
Monitor X's relationship with the bank by inspecting
correspondence with the bank
Obtain written representation on management's intentions and the
going concern basis
◉ The business has experienced rapid expansion which may be
indicative of overtrading resulting in cash flow problems..
Answer: Obtain post year-end management accounts and review X's
performance.
Obtain cash flow forecasts for the next 12 months to ascertain
whether X can pay its debts when they fall due and whether the
assumptions appear reasonable.
Perform sensitivity analysis on forecasts for key variables, e.g.
supplier contract fees.
Review post year end management accounts to assess the
company's performance
Inspect borrowing agreements and ensure that the company is able
to comply with any terms and conditions
Monitor X's relationship with the bank by inspecting
correspondence with the bank
,Obtain written representation on management's intentions and the
going concern basis
◉ New venture may create cash flow issues.
Answer: Obtain post year-end management accounts and review X's
performance.
Obtain cash flow forecasts for the next 12 months to ascertain
whether X can pay its debts when they fall due and whether the
assumptions appear reasonable.
Perform sensitivity analysis on forecasts for key variables, e.g.
supplier contract fees.
Review post year end management accounts to assess the
company's performance
Inspect borrowing agreements and ensure that the company is able
to comply with any terms and conditions
Monitor X's relationship with the bank by inspecting
correspondence with the bank
Obtain written representation on management's intentions and the
going concern basis
◉ company performance has been poor / loss predicted.
Answer: Obtain post year-end management accounts and review X's
performance.
, Obtain cash flow forecasts for the next 12 months to ascertain
whether X can pay its debts when they fall due and whether the
assumptions appear reasonable.
Perform sensitivity analysis on forecasts for key variables, e.g.
supplier contract fees.
Review post year end management accounts to assess the
company's performance
Inspect borrowing agreements and ensure that the company is able
to comply with any terms and conditions
Monitor X's relationship with the bank by inspecting
correspondence with the bank
Obtain written representation on management's intentions and the
going concern basis
◉ X is heavily reliant on supplier Y. Risk of agreement failure with Y.
Answer: Discuss with management its plan if an agreement cannot
be reached including whether management believes the company
would be able to continue.
Obtain a management representation regarding the director's plans
and their feasibility.
◉ adverse publicity.
Answer: Discuss with management whether recent adverse publicity
has impacted X's rate of growth or resulted in a loss of customers.
Enquire as to management's actions to address these issues.
FULLY SOLVED TASK PAPER GRADED A+
◉ Client is overseas.
Answer: Firm needs to consider whether it has sufficient staff to
send overseas or have its own overseas office.
Issue may arise with language barriers and consideration may have
to be given to using overseas auditors
◉ specific industry.
Answer: Firm needs to consider whether it has sufficient experience
of the industry to carry out the audit work
◉ timing of audit.
Answer: protect audit quality
◉ conflict of interest.
Answer: check with other clients
◉ incoming auditor.
Answer: why did the old auditor leave
,◉ overdraft review is due and possibility of facility being
withdrawn.
Answer: Inspect borrowing agreements and ensure that the
company is able to comply with any terms and conditions
Monitor X's relationship with the bank by inspecting
correspondence with the bank
Obtain written representation on management's intentions and the
going concern basis
◉ The business has experienced rapid expansion which may be
indicative of overtrading resulting in cash flow problems..
Answer: Obtain post year-end management accounts and review X's
performance.
Obtain cash flow forecasts for the next 12 months to ascertain
whether X can pay its debts when they fall due and whether the
assumptions appear reasonable.
Perform sensitivity analysis on forecasts for key variables, e.g.
supplier contract fees.
Review post year end management accounts to assess the
company's performance
Inspect borrowing agreements and ensure that the company is able
to comply with any terms and conditions
Monitor X's relationship with the bank by inspecting
correspondence with the bank
,Obtain written representation on management's intentions and the
going concern basis
◉ New venture may create cash flow issues.
Answer: Obtain post year-end management accounts and review X's
performance.
Obtain cash flow forecasts for the next 12 months to ascertain
whether X can pay its debts when they fall due and whether the
assumptions appear reasonable.
Perform sensitivity analysis on forecasts for key variables, e.g.
supplier contract fees.
Review post year end management accounts to assess the
company's performance
Inspect borrowing agreements and ensure that the company is able
to comply with any terms and conditions
Monitor X's relationship with the bank by inspecting
correspondence with the bank
Obtain written representation on management's intentions and the
going concern basis
◉ company performance has been poor / loss predicted.
Answer: Obtain post year-end management accounts and review X's
performance.
, Obtain cash flow forecasts for the next 12 months to ascertain
whether X can pay its debts when they fall due and whether the
assumptions appear reasonable.
Perform sensitivity analysis on forecasts for key variables, e.g.
supplier contract fees.
Review post year end management accounts to assess the
company's performance
Inspect borrowing agreements and ensure that the company is able
to comply with any terms and conditions
Monitor X's relationship with the bank by inspecting
correspondence with the bank
Obtain written representation on management's intentions and the
going concern basis
◉ X is heavily reliant on supplier Y. Risk of agreement failure with Y.
Answer: Discuss with management its plan if an agreement cannot
be reached including whether management believes the company
would be able to continue.
Obtain a management representation regarding the director's plans
and their feasibility.
◉ adverse publicity.
Answer: Discuss with management whether recent adverse publicity
has impacted X's rate of growth or resulted in a loss of customers.
Enquire as to management's actions to address these issues.
