Professional Level – Options Module, Paper P7 (UK) Advanced Audit and Assurance (United Kingdom) June 2009 Marking Scheme Marks 1 (a) (i) Identify and explain aspects of understanding business and environment NB Professional marks to be awarded for format, use of introduction and conclusion, use of language that an audit junior could understand. 2 Generally 1 / 2 mark for identification and 1 mark for explanation: – External factors – Entity and accounting policies – Objectives, strategies and business risks – Performance measures – Internal control 1 / 2 mark ref ISA 315 Maximum marks 6 (ii) Recommend procedures to gain understanding Generally 1 mark per procedure described: – Inquiry – Analytical procedure – Observation – Inspection Maximum marks 4 (b) Business risk Generally 1 / 2 mark for identification, 1 further mark for explanation, from ideas list. 1 mark to be given for each appropriate calculation e.g. trends, materiality – Risk of damage to brand name/bad publicity re injury to child and closed restaurant – Investment needed in play areas to prevent health and safety problems – Damage to the Happy Monkeys brand name may cross to other brand names – Compliance risk re health and safety regulations – food preparation – Fall in revenue from Quick-bite business segment – The above linked to reduced demand for fast food/more emphasis on healthy eating – Advertising ban could reduce revenue – Rapid expansion plans for City Sizzler chain – danger of overtrading – Potential lack of cash for the capital expenditure and on-going refurbishment costs – Potential lack of cash for continued advertising – Green George chain – need to monitor supply chain – PBT fallen 13% – poor cost control? – Minimum wage legislation will increase operating costs significantly next year – Cash position worsened during year – Cash based business – risk of fraud – Internal structure may need addressing Maximum marks 13 23
