Part AFrom the financial statements, the management commentary in the annual report and other sources, and using appropriate auditing procedures, identify THREE areas of heightened audit risk relating to the audit of this company this year. Explain in detail, using some quantitative analysis, why you consider these to be areas of increased audit risk. (50%)1.What does the company do and where does it do it?2.Do the financial statements indicate any anomalies requiring further investigation?3.Are there any ethical issues affecting this audit?4.Are there any recent changes in the economy, the industry, or the organisation creating risks?5.Are there any recent changes in accounting regulation affecting this company for this year?6.What are the key problematic accounting areas for this company?Income statementRevenueCo, No underlying decrease in revenueExplain: moverment of exchange rateChariman?s statement ?? RevenueAudit workIncrease in revenuein A-tha (440-380)/380=15.7% ?? where devaluation is be?83% X 53936(2013 revenue)= 44766with 15.7% increase= 51794+9160= 60954Effect of devaluation: 20%Exchange rate pounds to argentine pesosJune 13: 8.2013June 14: 13.853868.9%= (13.8538-8.2013)/ 8.201334% more than 20%Page 41Mobile operator servicesMobile internet servicesAudit:1.operate: contractdetails of downloads2.internet: downloads/ receipt of cash3.test of controlPage 36Receivableconcern 4341 June 2014Page 37Payableaccruals and 2829 & 4003B: In relation to ONE of the areas selected in Part A identify in detail, and explain the reasons for, FIVE substantive audit procedures you would carry out in attempting to reduce audit risk to an acceptably low level.(50%)Mobile Streams Sales & ReceivablesArea of riskSignificant decline in revenue in s/increase in revenue in Argetina/currency devaluationSignificant year-end adjustments for both accrued and deferred incomeFS assertions completeness/occurrence/classification/accuracy/cut offMobile internet services:Completeness:-Tests of controls over downloads/CAATs test packs/evaluate results-Sampling into registers of downloads/trace through NL accounting system/tracing to cash book-Analytical procedures: most popular downloads, reconcile total downloads to total cash receivedOccurrence:-Sampling into NL accounts, trace back to occurrence of download-Trace back from FS figures to NLa/cs: is total in FS made up of identifiable NLa/c totals. Investigate unusual journal entriesCut off:-Are there any receivables/are there any unusual adjustments at year end?Mobile Operator Sales:-For a sample: inspect contracts between MS and mobile network/components of revenue for mobile streams/timing issues-Commission: how do MS know how much commission they are entitled to? Detailed documentation analysing sales through mobile network.-Fixed fee licence income: contract to cash receipt, inclusion of income in correct period-From bank statements/cash book examine a s???-Added on 10.04.2015 10:09Part AFrom the financial statements, the management commentary in the annual report and other sources, and using appropriate auditing procedures, identify THREE areas of heightened audit risk relating to the audit of this company this year. Explain in detail, using some quantitative analysis, why you consider these to be areas of increased audit risk. (50%)1.What does the company do and where does it do it?2.Do the financial statements indicate any anomalies requiring further investigation?3.Are there any ethical issues affecting this audit?4.Are there any recent changes in the economy, the industry, or the organisation creating risks?5.Are there any recent changes in accounting regulation affecting this company for this year?6.What are the key problematic accounting areas for this company?Income statementRevenueCo, No underlying decrease in revenueExplain: moverment of exchange rateChariman?s statement ?? RevenueAudit workIncrease in revenuein A-tha (440-380)/380=15.7% ?? where devaluation is be?83% X 53936(2013 revenue)= 44766with 15.7% increase= 51794+9160= 60954Effect of devaluation: 20%Exchange rate pounds to argentine pesosJune 13: 8.2013June 14: 13.853868.9%= (13.8538-8.2013)/ 8.201334% more than 20%Page 41Mobile operator servicesMobile internet servicesAudit:1.operate: contractdetails of downloads2.internet: downloads/ receipt of cash3.test of controlPage 36Receivableconcern 4341 June 2014Page 37Payableaccruals and 2829 & 4003B: In relation to ONE of the areas selected in Part A identify in detail, and explain the reasons for, FIVE substantive audit procedures you would carry out in attempting to reduce audit risk to an acceptably low level.(50%)Mobile Streams Sales & ReceivablesArea of riskSignificant decline in revenue in s/increase in revenue in Argetina/currency devaluationSignificant year-end adjustments for both accrued and deferred incomeFS assertions completeness/occurrence/classification/accuracy/cut offMobile internet services:Completeness:-Tests of controls over downloads/CAATs test packs/evaluate results-Sampling into registers of downloads/trace through NL accounting system/tracing to cash book-Analytical procedures: most popular downloads, reconcile total downloads to total cash receivedOccurrence:-Sampling into NL accounts, trace back to occurrence of download-Trace back from FS figures to NLa/cs: is total in FS made up of identifiable NLa/c totals. Investigate unusual journal entriesCut off:-Are there any receivables/are there any unusual adjustments at year end?Mobile Operator Sales:-For a sample: inspect contracts between MS and mobile network/components of revenue for mobile streams/timing issues-Commission: how do MS know how much commission they are entitled to? Detailed documentation analysing sales through mobile network.-Fixed fee licence income: contract to cash receipt, inclusion of income in correct period-From bank statements/cash book examine a sample of large cash receiptsAccrued income:-Examine sample of post year end receipts and confirm allocated to correct accounting period-Examine sample of receivables, confirm receipt of cash after year end-Debtors circularisation on a sample of Mobile network receivablesDeferred income:-Sample into deferred income, confirm cash received, check back to contracts to identify time period covered, check calculationsAudit issues:-Foreign exchange rates/average rates/devaluation issue-Spanish language speakers

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