快讯！关于了解CFA、ACCA、FRM、CPA4大金融证书，并且有哪些就业前景呢？

正确答案：
(b) Effect of acquisition on planning the audit of Murray’s consolidated financial statements for the year ending 31 March
2008
Group structure
The new group structure must be ascertained to identify all entities that should be consolidated into the Murray group’s
financial statements for the year ending 31 March 2008.
Materiality assessment
Preliminary materiality for the group will be much higher, in monetary terms, than in the prior year. For example, if a % of
total assets is a determinant of the preliminary materiality, it may be increased by 10% (as the fair value of assets acquired,
including goodwill, is $2,373,000 compared with $21·5m in Murray’s consolidated financial statements for the year ended
31 March 2007).
The materiality of each subsidiary should be re-assessed, in terms of the enlarged group as at the planning stage. For
example, any subsidiary that was just material for the year ended 31 March 2007 may no longer be material to the group.
This assessment will identify, for example:
– those entities requiring an audit visit; and
– those entities for which substantive analytical procedures may suffice.
As Di Rollo’s assets are material to the group Ross should plan to inspect the South American operations. The visit may
include a meeting with Di Rollo’s previous auditors to discuss any problems that might affect the balances at acquisition and
a review of the prior year audit working papers, with their permission.
Di Rollo was acquired two months into the financial year therefore its post-acquisition results should be expected to be
material to the consolidated income statement.
Goodwill acquired
The assets and liabilities of Di Rollo at 31 March 2008 will be combined on a line-by-line basis into the consolidated financial
statements of Murray and goodwill arising on acquisition recognised.
Audit work on the fair value of the Di Rollo brand name at acquisition, $600,000, may include a review of a brand valuation
specialist’s working papers and an assessment of the reasonableness of assumptions made.
Significant items of plant are likely to have been independently valued prior to the acquisition. It may be appropriate to plan
to place reliance on the work of expert valuers. The fair value adjustment on plant and equipment is very high (441% of
carrying amount at the date of acquisition). This may suggest that Di Rollo’s depreciation policies are over-prudent (e.g. if
accelerated depreciation allowed for tax purposes is accounted for under local GAAP).
As the amount of goodwill is very material (approximately 50% of the cash consideration) it may be overstated if Murray has
failed to recognise any assets acquired in the purchase of Di Rollo in accordance with IFRS 3 Business Combinations. For
example, Murray may have acquired intangible assets such as customer lists or franchises that should be recognised
separately from goodwill and amortised (rather than tested for impairment).
Subsequent impairment
The audit plan should draw attention to the need to consider whether the Di Rollo brand name and goodwill arising have
suffered impairment as a result of the allegations against Di Rollo’s former chief executive.
Liabilities
Proceedings in the legal claim made by Di Rollo’s former chief executive will need to be reviewed. If the case is not resolved
at 31 March 2008, a contingent liability may require disclosure in the consolidated financial statements, depending on the
materiality of amounts involved. Legal opinion on the likelihood of Di Rollo successfully defending the claim may be sought.
Provision should be made for any actual liabilities, such as legal fees.
Group (related party) transactions and balances
A list of all the companies in the group (including any associates) should be included in group audit instructions to ensure
that intra-group transactions and balances (and any unrealised profits and losses on transactions with associates) are
identified for elimination on consolidation. Any transfer pricing policies (e.g. for clothes manufactured by Di Rollo for Murray
and sales of Di Rollo’s accessories to Murray’s retail stores) must be ascertained and any provisions for unrealised profit
eliminated on consolidation.
It should be confirmed at the planning stage that inter-company transactions are identified as such in the accounting systems
of all companies and that inter-company balances are regularly reconciled. (Problems are likely to arise if new inter-company
balances are not identified/reconciled. In particular, exchange differences are to be expected.)
Other auditors
If Ross plans to use the work of other auditors in South America (rather than send its own staff to undertake the audit of Di
Rollo), group instructions will need to be sent containing:
– proforma statements;
– a list of group and associated companies;
– a statement of group accounting policies (see below);
– the timetable for the preparation of the group accounts (see below);
– a request for copies of management letters;
– an audit work summary questionnaire or checklist;
– contact details (of senior members of Ross’s audit team).
Accounting policies
Di Rollo may have material accounting policies which do not comply with the rest of the Murray group. As auditor to Di Rollo,
Ross will be able to recalculate the effect of any non-compliance with a group accounting policy (that Murray’s management
would be adjusting on consolidation).
Timetable
The timetable for the preparation of Murray’s consolidated financial statements should be agreed with management as soon
as possible. Key dates should be planned for:
– agreement of inter-company balances and transactions;
– submission of proforma statements;
– completion of the consolidation package;
– tax review of group accounts;
– completion of audit fieldwork by other auditors;
– subsequent events review;
– final clearance on accounts of subsidiaries;
– Ross’s final clearance of consolidated financial statements.
Tutorial note: The order of dates is illustrative rather than prescriptive.

正确答案：

(ii) Discussion of financial performance
It is clear that 2006 has been a difficult year for Merton plc. There are very few areas of interest to shareholders where
anything positive can be found to say.
Profitability
Return on capital employed has declined from 14·4% in 2005, which compared favourably with the sector average of
12%, to 10·2% in 2006. Since asset turnover has improved from 1·5 to 1·6 in the same period, the cause of the decline
is falling profitability. Gross profit margin has fallen each year from 27·5% in 2004 to 25% in 2006, equal to the sector
average, despite an overall increase in turnover during the period of 10% per year. Merton plc has been unable to keep
cost of sales increases (14% in 2006 and 10% in 2005) below the increases in turnover. Net profit margin has declined
over the same period from 9·7% to 6·2%, compared to the sector average of 8%, because of substantial increases in
operating expenses (15·4% in 2006 and 10·6% in 2005). There is a pressing need here for Merton plc to bring cost
of sales and operating costs under control in order to improve profitability.
Gearing and financial risk
Gearing as measured by debt/equity has fallen from 67% (2005) to 63% (2006) because of an increase in
shareholders’ funds through retained profits. Over the same period the overdraft has increased from ￡1m to ￡8m and
cash balances have fallen from ￡16m to ￡1m. This is a net movement of ￡22m. If the overdraft is included, gearing
has increased to 77% rather than falling to 63%.
None of these gearing levels compare favourably with the average gearing for the sector of 50%. If we consider the large
increase in the overdraft, financial risk has clearly increased during the period. This is also evidenced by the decline in
interest cover from 4·1 (2005) to 2·8 (2006) as operating profit has fallen and interest paid has increased. In each year
interest cover has been below the sector average of eight and the current level of 2·8 is dangerously low.
Share price
As the return required by equity investors increases with increasing financial risk, continued increases in the overdraft
will exert downward pressure on the company’s share price and further reductions may be expected.
Investor ratios
Earnings per share, dividend per share and dividend cover have all declined from 2005 to 2006. The cut in the dividend
per share from 8·5 pence per share to 7·5 pence per share is especially worrying. Although in its announcement the
company claimed that dividend growth and share price growth was expected, it could have chosen to maintain the
dividend, if it felt that the current poor performance was only temporary. By cutting the dividend it could be signalling
that it expects the poor performance to continue. Shareholders have no guarantee as to the level of future dividends.
This view could be shared by the market, which might explain why the price-earnings ratio has fallen from 14 times to
12 times.
Financing strategy
Merton plc has experienced an increase in fixed assets over the last period of ￡10m and an increase in stocks and
debtors of ￡21m. These increases have been financed by a decline in cash (￡15m), an increase in the overdraft (￡7m)
and an increase in trade credit (￡6m). The company is following an aggressive strategy of financing long-term
investment from short-term sources. This is very risky, since if the overdraft needed to be repaid, the company would
have great difficulty in raising the funds required.
A further financing issue relates to redemption of the existing debentures. The 10% debentures are due to be redeemed
in two years’ time and Merton plc will need to find ￡13m in order to do this. It does not appear that this sum can be
raised internally. While it is possible that refinancing with debt paying a lower rate of interest may be possible, the low
level of interest cover may cause concern to potential providers of debt finance, resulting in a higher rate of interest. The
Finance Director of Merton plc needs to consider the redemption problem now, as thought is currently being given to
raising a substantial amount of new equity finance. This financing choice may not be available again in the near future,
forcing the company to look to debt finance as a way of effecting redemption.
Overtrading
The evidence produced by the financial analysis above is that Merton plc is showing some symptoms of overtrading
(undercapitalisation). The board are suggesting a rights issue as a way of financing an expansion of business, but it is
possible that a rights issue will be needed to deal with the overtrading problem. This is a further financing issue requiring
consideration in addition to the redemption of debentures mentioned earlier.
Conclusion
Ordinary shareholders need to be aware of the following issues.
1. Profitability has fallen over the last year due to poor cost control
2. A substantial increase in the overdraft over the last year has caused gearing to increase

3. It is possible that the share price will continue to fall
4. The dividend cut may warn of continuing poor performance in the future
5. A total of ￡13m of debentures need redeeming in two year’s time
6. A large amount of new finance is needed for working capital and debenture redemption
Appendix: Analysis of key ratios and financial information

正确答案：
(ii) Procedures to verify the number of serious accidents during 2007 could include the following:
Tutorial note: procedures should focus on the completeness of the disclosure as it is in the interest of Sci-Tech Co to
understate the number of serious accidents.
– Review the accident log book and count the total number of accidents during the year
– Discuss the definition of ‘serious accident’ with the directors and clarify exactly what criteria need to be met to
satisfy the definition
– For serious accidents identified:
? review HR records to determine the amount of time taken off work
? review payroll records to determine the financial amount of sick pay awarded to the employee
? review correspondence with the employee regarding the accident.
Tutorial note: the above will help to clarify that the accident was indeed serious.
– Review board minutes where the increase in the number of serious accidents has been discussed
– Review correspondence with Sci-Tech Co’s legal advisors to ascertain any legal claims made against the company
due to accidents at work
– Enquire as to whether any health and safety visits have been conducted during the year by regulatory bodies, and
review any documentation or correspondence issued to Sci-Tech Co after such visits.
Tutorial note: it is highly likely that in a regulated industry such as pharmaceutical research, any serious accident
would trigger a health and safety inspection from the appropriate regulatory body.
– Discuss the level of accidents with representatives of Sci-Tech Co’s employees to reach an understanding as to
whether accidents sometimes go unreported in the accident log book.

正确答案：

(a) The product life cycle model suggests that a product passes through six stages: introduction, development, growth, shakeout,
maturity and decline. The first Rock Bottom phase appears to coincide with the introduction, development and growth periods
of the products offered by the company. These highly specified, high quality products were new to the country and were
quickly adopted by a certain consumer segment (see below). The life cycle concept also applies to services, and the innovative
way in which Rock Bottom sold and marketed the products distinguished the company from potential competitors. Not only
were these competitors still selling inferior and older products but their retail methods looked outdated compared with Rock Bottom’s bright, specialist shops. Rock Bottom’s entry into the market-place also exploited two important changes in the
external environment. The first was the technological advance of the Japanese consumer electronics industry. The second
was the growing economic power of young people, who wished to spend their increasing disposable income on products that
allowed them to enjoy popular music. Early entrants into an industry gain experience of that industry sooner than others. This
may not only be translated into cost advantages but also into customer loyalty that helps them through subsequent stages of
the product’s life cycle. Rock Bottom enjoyed the advantages of a first mover in this industry.
Hein’s leadership style. appears to have been consistent with contemporary society and more than acceptable to his young
target market. As an entrepreneur, his charismatic leadership was concerned with building a vision for the organisation and
then energising people to achieve it. The latter he achieved through appointing branch managers who reflected, to some
degree, his own style. and approach. His willingness to delegate considerable responsibility to these leaders, and to reward
them well, was also relatively innovative. The shops were also staffed by young people who understood the capabilities of the
products they were selling. It was an early recognition that intangible resources of skills and knowledge were important to the
organisation.
In summary, in the first phase Rock Bottom’s organisation and Hein’s leadership style. appear to have been aligned with
contemporary society, the customer base, employees and Rock Bottom’s position in the product/service life cycle.
The second phase of the Rock Bottom story appears to reflect the shakeout and maturity phases of the product life cycle. The
entry of competitors into the market is a feature of the growth stage. However, it is in the shakeout stage that the market
becomes saturated with competitors. The Rock Bottom product and service approach is easily imitated. Hein initially reacted
to these new challenges by a growing maturity, recognising that outrageous behaviour might deter the banks from lending to
him. However, the need to raise money to fund expansion and a latent need to realise (and enjoy) his investment led to the
company being floated on the country’s stock exchange. This, eventually, created two problems.
The first was the need for the company to provide acceptable returns to shareholders. This would have been a new challenge
for Hein. He would have to not only maintain dividends to external shareholders, but he would also have to monitor and
improve the publicly quoted share price. In an attempt to establish an organisation that could deliver such value, changes
were made in the organisational structure and style. Most of the phase 1 entrepreneur-style. managers left. This may have
been inevitable anyway as Rock Bottom would have had problems continuing with such high individual reward packages in
a maturing market. However, the new public limited organisation also demanded managers who were more transactional
leaders, focusing on designing systems and controlling performance. This style. of management was alien to Rick’s approach.
The second problem was the need for the organisation to become more transparent. The publishing of Hein’s financial details
was embarrassing, particularly as his income fuelled a life-style. that was becoming less acceptable to society. What had once
appeared innovative and amusing now looked like an indulgence. The challenge now was for Hein to change his leadership
style. to suit the new situation. However, he ultimately failed to do this. Like many leaders who have risen to their position
through entrepreneurial ability and a dominant spirit, the concept of serving stakeholders rather than ordering them around
proved too difficult to grasp. The sensible thing would have been to leave Rock Bottom and start afresh. However, like many
entrepreneurs he was emotionally attached to the company and so he persuaded a group of private equity financiers to help
him buy it back. Combining the roles of Chairman and Chief Executive Officer (CEO) is also controversial and likely to attract
criticism concerning corporate governance.

In summary, in the second phase of Hein’s leadership he failed to change his approach to reflect changing social values, a
maturing product/service market-place and the need to serve new and important stakeholders in the organisation. He clearly
saw the public limited company as a ‘shackle’ on his ambition and its obligations an infringement of his personal privacy.
It can be argued that Hein took Rock Bottom back into private ownership just as the product life cycle moved into its decline
stage. The product life cycle is a timely reminder that any product or service has a finite life. Forty years earlier, as a young
man, Hein was in touch with the technological and social changes that created a demand for his product and service.
However, he had now lost touch with the forces shaping the external environment. Products have now moved on. Music is
increasingly delivered through downloaded files that are then played through computers (for home use) or MP3s (for portable
use). Even where consumers use traditional electronic equipment, the reliability of this equipment means that it is seldom
replaced. The delivery method, through specialised shops, which once seemed so innovative is now widely imitated and
increasingly, due to the Internet, less cost-effective. Consumers of these products are knowledgeable buyers and are only
willing to purchase, after careful cost and delivery comparisons, through the Internet. Hence, Hein is in a situation where he
faces more competition to supply products which are used and replaced less frequently, using a sales channel that is
increasingly uncompetitive. Consequently, Hein’s attempt to re-vitalise the shops by using the approach he adopted in phase
1 of the company was always doomed to failure. This failure was also guaranteed by the continued presence of the managers
appointed in phase 2 of the company. These were managers used to tight controls and targets set by centralised management.
To suddenly be let loose was not what they wanted and Hein appears to have reacted to their inability to act entrepreneurially
with anger and abuse. Hein’s final acts of reinvention concerned the return to a hedonistic, conspicuous life style. that he had
enjoyed in the early days of the company. He probably felt that this was possible now that he did not have the reporting
requirements of the public limited company. However, he had failed to recognise significant changes in society. He celebrated
the freeing of ‘Rock Bottom from its shackles’ by throwing a large celebration party. Celebrities were flown in from all over the
world to attend. It seems inevitable that the cost and carbon footprint of such an event would now attract criticism.
Finally, in summary, Hein’s approach and leadership style. in phase 3 became increasingly out of step with society’s
expectations, customers’ requirements and employees’ expectations. However, unlike phase 2, Hein was now free of the
responsibilities and controls of professional management in a public limited company. This led him to conspicuous activities
that further devalued the brand, meaning that its demise was inevitable.

(b) At the end of the first phase Hein still had managers who were entrepreneurial in their outlook. It might have been attractive
for them to become franchisees, particularly as this might be a way of protecting their income through the more challenging
stages of the product and service life cycle that lay ahead. However, by the time Hein came to look at franchising again (phase
3), the managers were unlikely to be of the type that would take up the challenge of running a franchise. These were
managers used to meeting targets within the context of centrally determined policies and budgets within a public limited
company. Hein would have to make these employees redundant (at significant cost) and with no certainty that he could find
franchisees to replace them.
At the end of phase 1, Rock Bottom was a strong brand, associated with youth and innovation. First movers often retain
customer loyalty even when their products and approach have been imitated by new aggressive entrants to the market. A
strong brand is essential for a successful franchise as it is a significant part of what the franchisee is buying. However, by the
time Hein came to look at franchising again in phase 3, the brand was devalued by his behaviour and incongruent with
customer expectations and sales channels. For example, it had no Internet sales channel. If Hein had developed Rock Bottom
as a franchise it would have given him the opportunity to focus on building the brand, rather than financing the expansion
of the business through the issue of shares.
At the end of phase 1, Rock Bottom was still a financially successful company. If it had been franchised at this point, then
Hein could have realised some of his investment (through franchise fees) and used some of this to reward himself, and the
rest of the money could have been used to consolidate the brand. Much of the future financial risk would have been passed
to the franchisees. There would have been no need to take Rock Bottom public and so suffer the scrutiny associated with a
public limited company. However, by the time Hein came to look at franchising again in phase 3, most of the shops were
trading at a loss. He saw franchising as a way of disposing of the company in what he hoped was a sufficiently well-structured
way. In effect, it was to minimise losses. It seems highly unlikely that franchisees would have been attracted by investing in
something that was actually making a loss. Even if they were, it is unlikely that the franchise fees (and hence the money
immediately realised) would be very high.