Other Assignments Flashcards
42-Kobold - Cleint Engagement
42-Kobold -Matters to conside before accepting PFI Engagement
1 mark for each relevant point explained. Is auditor current auditor?
Professional Relationship Assesment
* G&Co must evaluate client acceptance under ISQM 1& adhere to IESBA Code of Ethics.
Integrity & Ethical Values
* Due diligence required regarding Kobolds Co’s owners, mgmt and governance
* Concerns about mgmt bias in capital expenditure forecast preparation & potential manipulation for obtainining finance.
* Decision not to use existing auditor, why? Access to old auditor. Decline otherwise.
Performance Standards
* G & Co needs competent staff and adequate resources to perform assurance on cap ex forecast
* Short deadline may compromise quality; engagement should not be accepted if resources are insufficient.
Ethical Considerations
* Independence from Kobold Co crucial; any conflicts of interest w. existing clients must be addressed.
Intended Use of Information:
* Clarity needed on the purpose & distribution of the assurance report.
Key assumptions & scope
* G& Co asses reliability of assumptions & clarify the scope of engagement, focusing on capex forecast.
42-Kobold - Procedures for Forecast
1 mark for well described procedure.
Detailed analyses of Capex categories:
*Cast to confirm arithmetical accuracy of each category.
Loan Agreement Review:
* Review terms of repayment, interest rate, and guarantees/ security required.
Planning Approval Confirmation:
* Review for conditions attached to approval and ensure inclusion of associated costs in forecast.
Correspondence File Review:
* Identify relevant costs & confirm project approval.
Contract inspection:
* Confirm terms of engagement w. architect and surveyor, including fees.
Architect’s plans and surveyor’s reports:
*Confirm intentions to construct distribution center & understand key features.
Cost confirmation
* Confirm estimated costs of site preparation & building through contractor quotations.
Interior design review
* Confirm proposed fittings align with supplier price lists.
Discussion w. Mgmt on Assumptions:
*Address timings of stage payments, price changes and cost variability.
Identification of Omitted Costs:
* Discuss potential omissions such as loan interest, landscaping, or road access upgrades.
Board Minutes Review:
*Look for issues related to project or recent loan applications.
Analytical Review of Cashflow Trends:
*Compare forecast trends with historical data & industry/local economy data.
Sensitivity Analyses
*Vary key assumptions & assess their impact on capex forecast.
Written Representations from Mgmt:
* Obtain confirmation of reasonableness of assumption and compeletness of information provided.
