(c) Discuss how the manipulation of financial statements by company accountants is inconsistent with theirresponsibilities as members of the accounting profession setting out the distinguishing features of aprofession and the privileges that society gives to a profession. (Your answer should include reference to theabove scenario.) (7 marks)Note: requirement (c) includes 2 marks for the quality of the discussion.

考题 John, CPA, is auditing the financial statements of Company A for the year ended December 31, 20×8. The un-audited information of selected financial statements items is as follows:（Expressed in RMB thousands）FINANCLAL STATEMENTS ITEMS20×820×7Sales6400048000Cost of sales5400042000Net profit30-20December 31, 20×8December 31, 20×7Inventory1600012000Current assets6000050000Total assets10000090000Current liabilities2000018000Total liabilities3000025000During the audit, John has the following findings:(1)On December 31, 20×8,Company A discounted an undue commercial acceptance bill (with recourse) amounted to RMB 6000000, and was charged discounting interest of RMB 180000 by the bank. Company A made an accounting entry on December 31, 20×8 as follows:Dr. Cash in Bank RMB 5820000Dr. Financial Expenses RMB 180000Cr. Notes Receivable RMB 6000000(2)In June 20×8, Company A provided guarantee for Company B’s borrowings from Bank C. In December 20×8, since Company B failed to repay the borrowings in time, Company A was sued by Bank C to make relevant repayment amounted to RMB 3000000. As at December 31, 20×8, the lawsuit was still pending, and, based on the reasonable estimate of the guarantee losses made by the management, Company A made an accounting entry as follows:Dr. Non-operating Expenses RMB 3000000Cr. Provisions RMB 3000000On January 10, 20×9,Company A received a judgment on repaying RMB 2500000to Bank C to settle the guarantee obligation. Company A made the payment and an accounting entry at the end of January 2009 as follows:Dr. Provisions RMB 3000000Cr. Cash in Bank RMB 2500000Cr. Non-operating Income RMB 500000Required:(1)For Revenue and Net Profit, explain which one is more appropriate to be used to calculate planning materiality for Company A’s 20×8 financial statements as a whole. Explain the reasons of that conclusion.(2)Based on the un-audited in formation of selected financial statements items, for the purpose of using analytical procedures as risk assessment procedures, calculate the following ratios:(a)Inventory Turnover Rate in 20×8;(b)Gross Profit Ratio in 20×8;(c)After Tax Return on Total Assets in 20×8; and(d)Current Ratio as at December 31, 20×8(3)For each audit finding identified during the audit, list the suggested adjusting entries that John should made for Company A’s 20×8 financial statements. Tax effects, if any, are ignored.

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考题 (c) Discuss the ways in which budgets and the budgeting process can be used to motivate managers toendeavour to meet the objectives of the company. Your answer should refer to:(i) setting targets for financial performance;(ii) participation in the budget-setting process. (12 marks)

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考题 3 The directors of Panel, a public limited company, are reviewing the procedures for the calculation of the deferred taxprovision for their company. They are quite surprised at the impact on the provision caused by changes in accountingstandards such as IFRS1 ‘First time adoption of International Financial Reporting Standards’ and IFRS2 ‘Share-basedPayment’. Panel is adopting International Financial Reporting Standards for the first time as at 31 October 2005 andthe directors are unsure how the deferred tax provision will be calculated in its financial statements ended on thatdate including the opening provision at 1 November 2003.Required:(a) (i) Explain how changes in accounting standards are likely to have an impact on the provision for deferredtaxation under IAS12 ‘Income Taxes’. (5 marks)

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考题 5 Ambush, a public limited company, is assessing the impact of implementing the revised IAS39 ‘Financial Instruments:Recognition and Measurement’. The directors realise that significant changes may occur in their accounting treatmentof financial instruments and they understand that on initial recognition any financial asset or liability can bedesignated as one to be measured at fair value through profit or loss (the fair value option). However, there are certainissues that they wish to have explained and these are set out below.Required:(a) Outline in a report to the directors of Ambush the following information:(i) how financial assets and liabilities are measured and classified, briefly setting out the accountingmethod used for each category. (Hedging relationships can be ignored.) (10 marks)

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考题 (c) Issue of bondThe club proposes to issue a 7% bond with a face value of $50 million on 1 January 2007 at a discount of 5%that will be secured on income from future ticket sales and corporate hospitality receipts, which are approximately$20 million per annum. Under the agreement the club cannot use the first $6 million received from corporatehospitality sales and reserved tickets (season tickets) as this will be used to repay the bond. The money from thebond will be used to pay for ground improvements and to pay the wages of players.The bond will be repayable, both capital and interest, over 15 years with the first payment of $6 million due on31 December 2007. It has an effective interest rate of 7·7%. There will be no active market for the bond andthe company does not wish to use valuation models to value the bond. (6 marks)Required:Discuss how the above proposals would be dealt with in the financial statements of Seejoy for the year ending31 December 2007, setting out their accounting treatment and appropriateness in helping the football club’scash flow problems.(Candidates do not need knowledge of the football finance sector to answer this question.)

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考题 (d) Player tradingAnother proposal is for the club to sell its two valuable players, Aldo and Steel. It is thought that it will receive atotal of $16 million for both players. The players are to be offered for sale at the end of the current football seasonon 1 May 2007. (5 marks)Required:Discuss how the above proposals would be dealt with in the financial statements of Seejoy for the year ending31 December 2007, setting out their accounting treatment and appropriateness in helping the football club’scash flow problems.(Candidates do not need knowledge of the football finance sector to answer this question.)

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考题 (b) Describe with suitable calculations how the goodwill arising on the acquisition of Briars will be dealt with inthe group financial statements and how the loan to Briars should be treated in the financial statements ofBriars for the year ended 31 May 2006. (9 marks)

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考题 (c) Wader is reviewing the accounting treatment of its buildings. The company uses the ‘revaluation model’ for itsbuildings. The buildings had originally cost $10 million on 1 June 2005 and had a useful economic life of20 years. They are being depreciated on a straight line basis to a nil residual value. The buildings were revalueddownwards on 31 May 2006 to $8 million which was the buildings’ recoverable amount. At 31 May 2007 thevalue of the buildings had risen to $11 million which is to be included in the financial statements. The companyis unsure how to treat the above events. (7 marks)Required:Discuss the accounting treatments of the above items in the financial statements for the year ended 31 May2007.Note: a discount rate of 5% should be used where necessary. Candidates should show suitable calculations wherenecessary.

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考题 4 (a) Router, a public limited company operates in the entertainment industry. It recently agreed with a televisioncompany to make a film which will be broadcast on the television company’s network. The fee agreed for thefilm was $5 million with a further $100,000 to be paid every time the film is shown on the television company’schannels. It is hoped that it will be shown on four occasions. The film was completed at a cost of $4 million anddelivered to the television company on 1 April 2007. The television company paid the fee of $5 million on30 April 2007 but indicated that the film needed substantial editing before they were prepared to broadcast it,the costs of which would be deducted from any future payments to Router. The directors of Router wish torecognise the anticipated future income of $400,000 in the financial statements for the year ended 31 May2007. (5 marks)Required:Discuss how the above items should be dealt with in the group financial statements of Router for the year ended31 May 2007.

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考题 (c) At 1 June 2006, Router held a 25% shareholding in a film distribution company, Wireless, a public limitedcompany. On 1 January 2007, Router sold a 15% holding in Wireless thus reducing its investment to a 10%holding. Router no longer exercises significant influence over Wireless. Before the sale of the shares the net assetvalue of Wireless on 1 January 2007 was $200 million and goodwill relating to the acquisition of Wireless was$5 million. Router received $40 million for its sale of the 15% holding in Wireless. At 1 January 2007, the fairvalue of the remaining investment in Wireless was $23 million and at 31 May 2007 the fair value was$26 million. (6 marks)Required:Discuss how the above items should be dealt with in the group financial statements of Router for the year ended31 May 2007.Required:Discuss how the above items should be dealt with in the group financial statements of Router for the year ended31 May 2007.

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考题 (d) Additionally Router purchased 60% of the ordinary shares of a radio station, Playtime, a public limited company,on 31 May 2007. The remaining 40% of the ordinary shares are owned by a competitor company who owns asubstantial number of warrants issued by Playtime which are currently exercisable. If these warrants areexercised, they will result in Router only owning 35% of the voting shares of Playtime. (4 marks)Required:Discuss how the above items should be dealt with in the group financial statements of Router for the year ended31 May 2007.

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考题 5 Financial statements have seen an increasing move towards the use of fair values in accounting. Advocates of ‘fairvalue accounting’ believe that fair value is the most relevant measure for financial reporting whilst others believe thathistorical 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 levelof 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 anyadditional disclosures which may be required if fair value accounting is to be used exclusively in corporatereporting. (13 marks)

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考题 4 The transition to International Financial Reporting Standards (IFRSs) involves major change for companies as IFRSsintroduce significant changes in accounting practices that were often not required by national generally acceptedaccounting practice. It is important that the interpretation and application of IFRSs is consistent from country tocountry. IFRSs are partly based on rules, and partly on principles and management’s judgement. Judgement is morelikely to be better used when it is based on experience of IFRSs within a sound financial reporting infrastructure. It ishoped that national differences in accounting will be eliminated and financial statements will be consistent andcomparable worldwide.Required:(a) Discuss how the changes in accounting practices on transition to IFRSs and choice in the application ofindividual IFRSs could lead to inconsistency between the financial statements of companies. (17 marks)

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考题 (b) Discuss how management’s judgement and the financial reporting infrastructure of a country can have asignificant impact on financial statements prepared under IFRS. (6 marks)Appropriateness and quality of discussion. (2 marks)

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考题 (b) Discuss the relative costs to the preparer and benefits to the users of financial statements of increaseddisclosure of information in financial statements. (14 marks)Quality of discussion and reasoning. (2 marks)

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考题 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 estimatesand 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 onlyB 1 and 3 onlyC 2 and 3 onlyD All three items

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考题 19 Which of the following statements about intangible assets in company financial statements are correct accordingto international accounting standards?1 Internally generated goodwill should not be capitalised.2 Purchased goodwill should normally be amortised through the income statement.3 Development expenditure must be capitalised if certain conditions are met.A 1 and 3 onlyB 1 and 2 onlyC 2 and 3 onlyD All three statements are correct

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考题 6 Discuss how developments in each of the following areas has affected the scope of the audit and the audit workundertaken:(a) fair value accounting; (6 marks)

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考题 6 The explosive growth of investing and raising capital in the global markets has put new emphasis on the developmentof international accounting, auditing and ethical standards. The International Federation of Accountants (IFAC) hasbeen at the forefront of the development of the worldwide accountancy profession through its activities in ethics,auditing and education.Required:Explain the developments in each of the following areas and indicate how they affect Chartered CertifiedAccountants:(a) IFAC’s ‘Code of Ethics for Professional Accountants’; (5 marks)

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考题 6 Certain practices have developed that threaten to damage the integrity and objectivity of professional accountants andthe reputation of the accounting profession.Required:Explain the following practices and associated ethical risks and discuss whether current ethical guidance issufficient:(a) ‘lowballing’; (5 marks)

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考题 (ii) Discuss TWO problems that may be faced in implementing quality control procedures in a small firm ofChartered Certified Accountants, and recommend how these problems may be overcome. (4 marks)

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考题 (c) With specific reference to Hugh Co, discuss the objective of a review engagement and contrast the level ofassurance provided with that provided in an audit of financial statements. (6 marks)

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考题 The finance director of Blod Co, Uma Thorton, has requested that your firm type the financial statements in the formto be presented to shareholders at the forthcoming company general meeting. Uma has also commented that theprevious auditors did not use a liability disclaimer in their audit report, and would like more information about the useof liability disclaimer paragraphs.Required:(b) Discuss the ethical issues raised by the request for your firm to type the financial statements of Blod Co.(3 marks)

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考题听力原文：M: There are several reasons why careful analysis of financial statements is necessary. What are they?W: First, financial statements are general-purpose statements. Secondly, the relationships between amounts on successive financial statements are not obvious without analysis. And thirdly, users of financial statements may be interested in seeing how well a company is performing.Q: What are they talking about?(17)A．The methods of financial statements.B．The necessity of careful analysis of financial statementsC．The relationship among financial statements.D．The purpose of financial statements.

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考题 The two most common specialized fields of accounting in practice are(). A.managerial accounting and financial accountingB.managerial accounting and environmental accountingC.forensic accounting and financial accountingD.financial accounting and tax accounting systems

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考题资料：Many people think of internal control as a means of safeguarding cash and preventing fraud. Although internal control is an important factor in protecting assets and preventing fraud, this is only a part of its roles. Remember that business decisions are based on accounting data and the system of internal control provides assurance of the dependability of the accounting data used in making decisions. The decisions made by management are communicated throughout the organization and become company policy. The results of the policies-----the consequences of managerial decisions----must be reported back to management so that the soundness of company policies can be evaluated. Among the means of communication included in the system of internal control are organization charts, manuals of accounting policies and procedures, flow charts, financial forecasts, purchase orders, receiving reports, invoices, and other documents. The term documentation refers to all the charts, forms, reports, and other business papers that guide and describe the working of a company's system of accounting and internal control. Internal controls fall into two major classes: administrative controls and accounting controls. Administrative controls are measures that increase operational efficiency and compliance with policies in all parts of organization. For example, an administrative control may be a requirement that traveling salespersons submit reports showing the number of calls made on customers each day. Another example is a directive require airline pilots to have regular medical examinations. These internal administrative controls have no direct bearing on the reliability of the financial statements. Consequently, administrative controls are not of direct interest on accountants and independent auditors. Internal accounting controls are measures that relate to protection of assets and to the reliability of accounting and financial reports. An example is the requirement that a person whose duties involve handling cash shall not also maintain accounting records. More broadly stated, the accounting function must be kept separate from the custody of assets. Another accounting control is the requirement that checks, purchase orders, and other documents be serially numbered. Still another example is the rule that a person who orders merchandise and supplies should not be the one to receive them and should not sign checks to pay for them. The results of managerial decisions must be reported back to managements so that （）can be evaluated?A.The means of communication B.The level of performance in all divisions of the company C.The effectiveness of company policies D.The financial reports

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考题资料：Many people think of internal control as a means of safeguarding cash and preventing fraud. Although internal control is an important factor in protecting assets and preventing fraud, this is only a part of its roles. Remember that business decisions are based on accounting data and the system of internal control provides assurance of the dependability of the accounting data used in making decisions. The decisions made by management are communicated throughout the organization and become company policy. The results of the policies-----the consequences of managerial decisions----must be reported back to management so that the soundness of company policies can be evaluated. Among the means of communication included in the system of internal control are organization charts, manuals of accounting policies and procedures, flow charts, financial forecasts, purchase orders, receiving reports, invoices, and other documents. The term documentation refers to all the charts, forms, reports, and other business papers that guide and describe the working of a company's system of accounting and internal control. Internal controls fall into two major classes: administrative controls and accounting controls. Administrative controls are measures that increase operational efficiency and compliance with policies in all parts of organization. For example, an administrative control may be a requirement that traveling salespersons submit reports showing the number of calls made on customers each day. Another example is a directive require airline pilots to have regular medical examinations. These internal administrative controls have no direct bearing on the reliability of the financial statements. Consequently, administrative controls are not of direct interest on accountants and independent auditors. Internal accounting controls are measures that relate to protection of assets and to the reliability of accounting and financial reports. An example is the requirement that a person whose duties involve handling cash shall not also maintain accounting records. More broadly stated, the accounting function must be kept separate from the custody of assets. Another accounting control is the requirement that checks, purchase orders, and other documents be serially numbered. Still another example is the rule that a person who orders merchandise and supplies should not be the one to receive them and should not sign checks to pay for them. （）are not the means of communication included in the system of internal controls.A.Financial forecasts B.According rules C.Manuals of accounting policies and procedures D.Organization charts

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