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Thank-you for completing the Independent Review License. Please note the essay section is marked manually by an external moderator and can take up to 10-14 working days to mark.
Your firm has been engaged to conduct an Independent Review in terms of ISRE 2400 of ACCA (Pty) Limited a company which retails a wide range of home entertainment products through its own retail outlets.
The financial statements cover the 12-month period ended on 30 June 2011. These financial statements are to be used in negotiations with a company which manufactures television sets. You commenced your review but quickly realized there was a problem with inventory. You found that inventory records were incomplete and that inadequate inventory internal controls existed at most of the retail outlets. When you discussed the problem with Mr Van Wyk he responded as follows:
“We are fully aware of the shortcomings of our inventory system. We estimated inventory at 30 June instead of counting it for precisely this reason. I cannot see that it should be a problem for you as we have not asked you to perform an audit”.
Provide a list of responses that you will use to comment on Mr. Van Wyk’s perception of your responsibilities as an independent reviewer in relation to this engagement.
This response will be reviewed and graded after submission.
You are a partner in the small accounting firm of Tinky, Winky and Co. Your firm has been approached by the directors of Mamza Exploration (Pty) Ltd a mineral exploration company operating in Southern Africa to conduct an independent review in terms of the Companies Act, 2008.
Mamza has an erratic profit history due mainly to the nature of the business. 40% of the company’s shares are held by the directors with the balance of the shares being held by Bottel International Corporation an American based mining conglomerate.
Mamza Exploration (Pty) Ltd have recently discovered what they believe to be a potentially viable gold seam and are proposing to develop a mine. The mine will be financed by BABSA Bank, the funds being advanced by an unspecified international finance house.
Briefly discuss the matters to which you would give consideration prior to deciding whether to accept this engagement.
This response will be reviewed and graded after submission.
Your firm has been engaged by the directors of Zip (Pty) Ltd a construction company, to review a set of financial statements for the 12 months ended 30 June 2011. This is a first time engagement.
The financial statements are required by the company’s the Companies Act, 2008 and the bank and must be drawn up in terms of the IFRS for SMEs.
You were not the reviewer of Zip (Pty) Ltd for the year-end review 30 June 2010 but you contacted the existing reviewers (with the permission of Zip (Pty) Ltd) who indicated that there would be no problems with you accepting the review engagement.
Your review consisted primarily of analytical reviews and discussion with management. During your review it became apparent that the company had taken into account in the income statement, all of the expected profit on a contract the company had signed shortly before the end of June to erect a luxury hotel.
When you approach the directors they confirm that they have indeed taken the profit into account. The financial director, Ben Down informs you that this contract is the seventh hotel built for the Livya Sun hotel group. All the hotels have been built to the same specifications and Zip (Pty) Ltd has made their budgeted profit on each. For this reason the directors have decided to abandon the method which they had adopted in the past for recognizing profit and to take profit on the signing of the contract. The profit however, has not been included in the taxation calculation. The directors decide to depart from IFRS for SME.
 Briefly discuss your duties in terms of the above.
This response will be reviewed and graded after submission.
Mr. Van Wyk has just commenced practicing as an independent reviewer in terms of the Companies Act, 2008.
He estimates that his income for this first year of operations will be R50,000. A potential review client ACCA (Pty) Limited has approached him to accept the appointment as the Independent Reviewer of ACCA (Pty) Limited .
He has estimated that his fee will total R10,000.
Indicate whether he can accept the appointment and list a number of reasons for your answer.
This response will be reviewed and graded after submission.
Provide a list of minimum review procedures that should be performed in a review engagement.
This response will be reviewed and graded after submission.
List the main themes that should be included in the practitioner’s report issued on the financial statements.
This response will be reviewed and graded after submission.