ACCA AAA ^UK Syllabus C. Practice Management - Tendering - Past Papers ^{4 / 4}

You are an audit manager in Weston & Co which is an international firm of Chartered Certified Accountants with branches in many countries and which offers a range of audit and assurance services to its clients. Your responsibilities include reviewing ethical matters which arise with audit clients, and dealing with approaches from prospective audit clients.

The management of Jones Co has invited Weston & Co to submit an audit proposal (tender document) for their consideration. Jones Co was established only two years ago, but has grown rapidly, and this will be the first year that an audit is required. In previous years a limited assurance review was performed on its financial statements by an unrelated audit firm. The company specialises in the recruitment of medical personnel and some of its start up funding was raised from a venture capital company. There are plans for the company to open branches overseas to help recruit personnel from foreign countries.

Jones Co has one full-time accountant who uses an off-the-shelf accounting package to record transactions and to prepare financial information. The company has a financial year ending 31 March 2015.

The following comment was made by Bentley Jones, the company’s founder and owner-manager, in relation to the audit proposal and potential audit fee:

‘I am looking for a firm of auditors who will give me a competitive audit fee. I am hoping that the fee will be quite low, as I am willing to pay more for services that I consider more beneficial to the business, such as strategic advice. I would like the audit fee to be linked to Jones Co’s success in expanding overseas as a result of the audit firm’s advice. Hopefully the audit will not be too disruptive and I would like it completed within four months of the year end.’

Required:
(i) Explain the specific matters to be included in the audit proposal (tender document), other than those relating to the audit fee; and (8 marks)

You are an audit manager in Weller & Co, an audit firm which operates as part of an international network of firms. This morning you received a note from a partner regarding a potential new audit client:

‘I have been approached by the audit committee of the Plant Group, which operates in the mobile
telecommunications sector. Our firm has been invited to tender for the audit of the individual and group financial statements for the year ending 31 March 2013, and I would like your help in preparing the tender document. This would be a major new client for our firm’s telecoms audit department.

The Plant Group comprises a parent company and six subsidiaries, one of which is located overseas. The audit committee is looking for a cost effective audit, and hopes that the strength of the Plant Group’s governance and internal control mean that the audit can be conducted quickly, with a proposed deadline of 31 May 2013. The Plant Group has expanded rapidly in the last few years and significant finance was raised in July 2012 through a stock exchange listing.’

Required:

Identify and explain the specific matters to be included in the tender document for the audit of the Plant Group. (8 marks)