(a)

(i) Evaluation of audit risks
Up to 2 marks for each audit risk evaluated, and 1 mark for relevant calculations (e.g. materiality,
trends):
– Stock exchange listing and pressure on results
– Disclosure for listed companies
– Foreign exchange transactions and potential derivatives (up to 3 marks)
– Payment in advance and revenue recognition
– Potential for cancelled contracts and implication for valuation of work in progress
– New directors
– Cash-settled share-based payment scheme
– Revaluation of property
– Deferred tax recognition
– Government grant recognition and potential for repayment if terms are breached
– Inventory valuation
– Provision in respect of returned goods
– Working capital
Maximum marks 18

(ii) Additional information
1 mark for each relevant piece of relevant information recommended. The list below is indicative, and
credit should be given for other relevant recommendations:
– Details of the stock exchange listing during the year
– Information on the specific listing rules relevant to the stock exchange
– Details on the planned foreign stock exchange listing
– Information on the background and experience of the new non-executive directors and the new
finance director
– A full set of draft financial statements including a statement of cash flows
– Details on the valuation of properties such as date of valuation and name of the valuer
– Documentation on the cash-settled share-based payment scheme
Maximum marks 5