AAA-INT Specimen – from September 2022 onwards

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It is 1 July 20X5. You are a manager in the audit department of Pegasus & Co, a firm
Exhibits
of Chartered Certified Accountants. You are assigned to the audit of the Crux Group
1. Partner’s email (the Group), which has a financial year ending 30 September 20X5, and is a listed
entity.
2. Background information

3. Selected financial information Pegasus & Co was appointed auditor to the Group in January 20X5.

4. Audit team meeting notes The Group operates in the travel industry, offering a selection of worldwide itineraries
and has a fleet of 20 cruise ships. The Group operates three brands which provide
Requirement different types of cruise experience.
Requirement (50 marks)
The following exhibits, available on the left-hand side of the screen, provide
information relevant to the question:
Response Options
Briefing notes
1. Partner’s email - an email which you have received from Norma Star, the Group
Spreadsheet audit engagement partner.
2. Background information - information and matters relevant to audit planning.
3. Selected financial information - extracts from the Group management accounts.
4. Audit team meeting notes - extracts from meeting notes taken at a recent audit
team meeting.

This information should be used to answer the question requirement within your
chosen response option(s).

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Crux Group - Extracts from the Group management accounts

Projected to 30 September 20X5 Actual to 30 September 20X4

Note $ million $ million
Group revenue 1 764 670

Operating profit 145 101

Profit before tax 81 65

Total assets 1,800 1,780

Included in total assets:

Intangible assets – operating licences 2 56 57
Property, plant and equipment 3 1,520 1,510

Note 1
Revenue includes passenger ticket sales, which accounts for approximately 85% of revenue. When customers book a cruise they are required
to pay a refundable 20% deposit, which is initially recognised as deferred revenue. The balance of 80% is paid at least six weeks before the
cruise commences and at that point it is also recognised as a deferred revenue. The full amount of the ticket price is transferred to revenue
when the cruise starts irrespective of the duration of the cruise. The remaining 15% of revenue is derived from on-board sales of food, drinks,
entertainment and other items to passengers. Management monitor this revenue stream closely as it achieves a high gross profit margin, and
staff are encouraged to maximise these sales to customers.

Revenue is presented on a segmental basis in the notes to the financial statements, with segments based on the three brands of the Group:

Revenue per operating segment Projected to 30 September 20X5 Actual to 30 September 20X4
$ million $ million
Sunseeker Cruises 320 288
Explorer Cruises 180 190
Pioneer Cruises 264 192
Total 764 670

Note 2
Operating licences are required for the Pioneer Cruise ships to visit certain destinations. Licences are amortised over the specific period to
which each licence relates.

Note 3
Property, plant and equipment is comprised as follows:
Property, plant and equipment Projected to 30 September 20X5 Actual to 30 September 20X4
$ million $ million
Ships in use 2,041 2,010
Ships under construction 83 62
Other property, plant and equipment 180 173
2,304 2,245
Accumulated depreciation -784 -735
Carrying amount 1,520 1,510
Respond to the instructions in the email from the audit engagement partner.

Note: The split of the mark allocation is shown in Exhibit 1 - Partner’s email.

(40 marks)

Professional marks will be awarded for the demonstration of skill in communication, analysis and
evaluation, professional scepticism and judgement and commercial acumen in your answer.

(10 marks)
AAA-INT Specimen – from September 2022 onwards
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It is 1 July 20X5. You are an audit manager in Welford & Co, a firm of Chartered
Exhibits
Certified Accountants. Your role includes performing post-issuance audit quality
1. Team and fees reviews, and you have been asked to review the audit work performed on Rivers Co
for the financial year ended 31 January 20X5.
2. Going concern

The following exhibits, available on the left-hand side of the screen, provide
Requirement
information relevant to the question:
Requirement (25 marks)

1. Team and fees – information regarding the audit team composition, the time spent
Response Options on the audit and fees charged to the client.
Word Processor 2. Going concern – details some matters you have identified during your review of the
going concern section of the audit file.

This information should be used to answer the question requirement within the
response option provided.

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Evaluate the quality of the planning and performance of the audit of Rivers Co, discussing the
quality management, ethical and other professional issues raised and recommending appropriate
actions to be taken.

(20 marks)

Professional marks will be awarded for the demonstration of skill in analysis and evaluation, professional
scepticism and judgement and commercial acumen in your answer.

(5 marks)
AAA-INT Specimen – from September 2022 onwards
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It is 1 July 20X5. You are the manager responsible for the audit of Myron Co, a listed
Exhibits
company and you are in the process of completing the audit of the financial statements
1. Completion matters for the year ended 31 March 20X5. The auditor’s report is due to be signed in the next
few weeks. The company’s principal operating activity is the publication of trade and
2. Chairman’s statement
scientific journals.

Requirements
The draft financial statements recognise revenue of $108 million (20X4: $102 million),
Requirements (25 marks) profit before tax of $9.3 million (20X4: $8.2 million) and total assets of $150 million
(20X4: $149 million). Materiality has been set at $0.5 million.
Response Options
Word Processor The following exhibits, available on the left-hand side of the screen, provide
information relevant to the question:

1. Completion matters - details regarding an issue you have discovered during your
review of the audit working papers.
2. Chairman’s statement - management has provided you with an extract from the
chairman’s statement which they intend to publish in the annual report.

This information should be used to answer the question requirements within the
response option provided.

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(a) Using the information contained in Exhibit 1:

(i) Comment on the completion matters to be considered in relation to the issue described and
recommend the further actions necessary before the auditor’s report can be signed; and

(ii) Evaluate the implications for the auditor’s report if no adjustments are made to the financial
statements.

(10 marks)

(b) Using the information contained in Exhibit 2:

(i) Describe the auditor's responsibilities in relation to the other information presented with audited
financial statements and evaluate the matters arising from the extract from the chairman's
statement; and

(5 marks)

(ii) Assuming no changes are made to the chairman's statement, evaluate the implications for the
completion of the audit and the auditor’s report.

(5 marks)

Professional marks will be awarded for the demonstration of skill in analysis and evaluation, and
professional scepticism and judgement in your answer.

(5 marks)