accg340 2013

Topics: Audit, Auditing, Auditor's report Pages: 18 (3215 words) Published: January 26, 2014

This question paper must be
returned. Candidates are not
permitted to remove any part
of it from the examination room.

SEAT NUMBER: ……….… ROOM: .……………….

FAMILY NAME.………….....………………………….

OTHER NAMES…………….…………………..……..

STUDENT NUMBER………….………..……………..

SESSION 2 EXAMINATIONS - NOVEMBER 2013

Unit Code/Name:ACCG340 Auditing and Assurance Services

Time Allowed:Two and a half hours plus 10 minutes reading time

Total Number
of Questions:There are two sections to this paper: Section A contains 4 written answer questions. Section B contains 18 multiple choice questions.

Instructions:
The total exam paper is worth 80 marks.
Section A comprises 4 written answer questions worth a total of 62 marks. Section A questions are not worth equal marks.
Section B contains 18 multiple choice questions worth a total of 18 marks (1 mark each). All sections and all questions must be completed.
Answers to Section A are to written on the exam paper in blue or black ink in the spaces provided. Answers to Section B are to be written on the Multiple Choice Answer Sheet.

Materials Permitted/Not Permitted:

Dictionaries:
No dictionaries permitted.

Calculators:
No calculators permitted.

Section
Question
Value
Mark
A
1
22

2
16

3
10

4
14

B
MCQ
18

Total
80

Section A (62 marks)

Question 1 (22 marks)

Assume you are the auditor assigned to the audit of J. Bebarfalds, a major listed department store chain in Australia. While doing research on the Australian retail industry, you read the following article in The Australian News Review:

“In disturbing news for any business reliant on household spending, economic survey figures due this week are expected to show consumers are becoming increasingly pessimistic….”. There is a risk that reduced consumer spending would eventually convince many retailers to cut staff or close altogether, sending reverberations throughout the economy. Retailers are realizing this is not just a six-month slowdown in spending - retail confidence is as bad as it has been since the early 1990s recession”.

(Extract from The Australian News Review, Monday 21 October 2013, “Spending strike expected to worsen” by Brian Rollins)

This prompts you to call a meeting of the audit team, to consider the implications of this article on your client. At the meeting, the audit partner circulated draft results for J. Bebarfalds, for the year ended 31 October 2013 and for the corresponding prior period. These are shown below:

J Bebarfalds Limited
Key financial data:

2013
2012

(Unaudited)
(Audited)

$m
$m

Sales
1,628.1
1,985.5
Gross Margin
690.4
786.1
Net Profit
128.3
156.5

Cash
13.6
14.6
Inventory
298.3
244.8
Property, plant and equipment
861.6
724.1
Intangible assets 1
23.2
23.2
Accounts payable
244.5
244.1
Provision for redundancy
6.3
8.8

1 Includes costs associated with current branding and logo

In addition to discussing The Australian News Review article, you mention to the audit team the following matters, which you learned via recent discussions with the client’s Finance Director:

The store refurbishment and redecoration program is continuing. This includes dismantling old shop fittings and replacement with new fittings, new floor, wall and ceiling finishes and new signage. The majority of stores are undergoing refurbishment / redecoration. This program requires on-going detailed and time consuming adjustments to the fixed assets register.

In an attempt to reverse the fortunes of J. Bebarfalds, the Directors have proposed a new branding scheme, with a more modern logo, to be developed in the 2014 financial year. The current logo is distinctive and easily recognised by Australian consumers and was costly to develop. In addition, the Remuneration Committee has introduced a new bonus scheme for the Directors, linked to...
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