[20:25:24] --------------------------Paper P7-------------------------[20:27:02] babar2012: < Q'S IN TONIGHTS SESSION: Q3 JUNE 2008 & Q5 DEC 2007 > [20:28:45]

babar2012: LINK TO Q5: [20:28:48] babar2012: http://www.accaglobal.com/pubs/students/acca/exams/p7/past_papers/int/p7int_2008_jun_q.pdf [20:28:49] mshaka: hi [20:29:01] babar2012: {mshaka} HELLO DEAR [20:30:16] babar2012: Thanks mate, I am good & hope you guys're all good n ready for p7;) [20:30:26] mshaka: wt u did yesterday [20:30:31] mshaka: i missed [20:30:41] babar2012: abar2012: < Q'S IN TONIGHTS SESSION: Q3 JUNE 2008 & Q5 DEC 2007 > babar2012: LINK TO Q5: babar2012: http://www.accaglobal.com/pubs/students/acca/exams/p7/past_papers/int/p7int_2008_jun_q.pdf [20:32:13] babar2012: SHALL WE START GUYS: [20:32:26] mshaka: yes [20:32:56] babar2012: ok - PLEASE READ THE Q'5 & COME BACK IN 10 MINUTES TO DISCUSS THIS; [20:33:00] babar2012: HERE IS THE LINK; [20:33:03] babar2012: http://www.accaglobal.com/pubs/students/acca/exams/p7/past_papers/int/p7int_2008_jun_q.pdf [20:33:13] babar2012: SORRY [20:33:14] babar2012: 13 [20:33:16] babar2012: Q3 [20:33:17] babar2012: ;) [20:36:19] tauseef89: are we starting ? [20:37:05] babar2012: {tauseef89} WE'RE READING THE Q'S; PLEASE BARE WITH US FOR FEW MORE MINUTES; WILL START IN APPROX. 6 MINS; [20:37:46] tauseef89: {babar2012} Thx

[20:43:11] babar2012: 3 (a) Discuss why the identification of related parties, and material related party transactions, can be difficult for auditors. (5 marks) [20:43:35] babar2012: Please start writing ; if you're ready now; [20:45:00] invalidthoughtz: complex subjective and difficult to identify [20:45:38] babar2012: - in my view this is related to ISA 550; Related Parties. - Its difficult for an auditor to identify related parties becasue the Management / Directors are likely to be involved in this & resultantly are most likely to HIDE it from the AUDITOR; [20:45:39] tauseef89: Knowledge limited to Directors and Management of Co [20:46:02] invalidthoughtz: as ias24 says dat party shud cotrol or is controled by or is under common control [20:46:05] tauseef89: Complex structure and influence [20:46:06] aabubakar: a related party is when a party is in control,in common control or controled by another party [20:46:12] invalidthoughtz: and control is not always easy to identify [20:46:13] invalidthoughtz: :P [20:46:52] aabubakar: internal controls may not be in place to identify related parties [20:47:06] invalidthoughtz: management is reluctant to state da fact..... may b due to hiding a fraud:P [20:47:50] tauseef89: manipulation and window dressing by directors to hide true results and figure to improve performance and positon of Co [20:48:47] babar2012: - in terms of Materiality; s far as RELATED P; are concerned its not the QUANTITY but the QUALITY that we're concerned about; [20:48:58] tauseef89: in the context ! [20:49:02] aabubakar: related parties are material by nature [20:49:31] tauseef89: {babar2012} Question Chicky P2 notes LSBF [20:51:15] babar2012: {tauseef89} i.e. to imply that certain Transactions between the related parties [Mgt/Directors] would be regarded as material; as otherwise the public/users reliability on FS will be weaken; its more to do with Quality; [20:51:47] babar2012: {tauseef89} i may not be explaining myself perfectly here; but i hope you get my point; [20:52:03] tauseef89: {babar2012} I didn't said any thing negative [20:52:10] babar2012: :)

[20:52:10] tauseef89: just giving u reference for help [20:53:22] babar2012: {aabubakar} yes - by nature [20:53:30] tauseef89: guys we need 3 points valid to explained for 5marks [20:53:55] tauseef89: is it ? [20:54:16] babar2012: yes - & a discussion on them; [20:54:27] tauseef89: yes [20:54:31] babar2012: OK - we look GOOD for part- a; [20:54:41] babar2012: unless anyone has anymore points to ADD ?? [20:55:10] babar2012: (b) In relation to the receivable recognised on the statement of financial position (balance sheet) of Pulp Co as at 31 January 2008: (i) Comment on the matters you should consider. (5 marks) [20:55:34] babar2012: NB: it says COMMENT [20:55:39] babar2012: for 5 marks; [20:55:53] tauseef89: Materiality [20:56:16] tauseef89: we should calculate Materiality figure [20:56:23] tauseef89: and explain this point [20:56:46] babar2012: please eveyone contribute; Guys; thanks :) [20:57:07] babar2012: *everyone [20:57:16] invalidthoughtz: ias 24... whether this is a related party transaction or not [20:57:21] babar2012: - Related parties - ISA 550 [20:57:29] invalidthoughtz: if it is wot is to b closed [20:57:45] aabubakar: according to IAS 24 related pary transactions,since PULP co chairman controls Jarvis co ,a related pary transaction exists [20:57:46] babar2012: - check last yr working papers & identify any RP thereon [20:57:46] invalidthoughtz: n incase if its breached den wots shud b da impact on da report [20:57:54] tauseef89: related party transactions must be disclosed [20:57:57] babar2012: {aabubakar} yes [20:58:07] tauseef89: check weather criteria of IAS 24 applied

[20:58:24] invalidthoughtz: check out da possiblity of the recoverablitiy of the balance [20:58:38] aabubakar: its material by nature and must be disclosed [20:58:47] aabubakar: {tauseef89} yes [20:58:49] invalidthoughtz: and check whether other transaction of this nature hav taken place [20:58:50] babar2012: - suffcient / appropriate A. evidence [20:59:23] tauseef89: check weather receivable are correctly valued [21:00:00] tauseef89: check weather classification of receivables as asset in relation to IAS 24 [21:00:10] babar2012: - confirm with previous auditor [ i.e. knowing of any RP]; [21:00:18] aabubakar: we are answering both i) and ii)? [21:00:32] tauseef89: {aabubakar} 1 only [21:00:40] babar2012: (ii) Recommend further audit procedures that should be carried out. [21:00:48] babar2012: please now also asnwer part -ii [21:01:01] babar2012: - confirm with previous auditor [ i.e. knowing of any RP]; [21:01:14] tauseef89: I cannot see any disclosures made by Co for related party transactions would impact audit opnion thus audit report ! [21:01:24] babar2012: {tauseef89} Yes [21:01:25] invalidthoughtz: written representation from peter bout his control, amount of balance n number of transactions [21:01:34] aabubakar: check after date payments to determine if it has been paid [21:02:17] aabubakar: {invalidthoughtz} yes [21:02:56] invalidthoughtz: check jarivis co financial statements for see if da control and balance by peter actually exists and r they able to pay em out [21:02:59] babar2012: - evaluate the reasons / assumptions of last yr non disclore [21:03:12] tauseef89: {invalidthoughtz} ???????????? [21:03:14] babar2012: *disclosure [21:03:44] invalidthoughtz: {tauseef89} wot didnt u get or m i simply wrong :P [21:04:05] tauseef89: {invalidthoughtz} i didn't get your point ? please illustrate it [21:04:45] invalidthoughtz: audited financial statements of jarvis to b checked

[21:04:48] babar2012: - who was made incharge of this REVIEW of PULP last yr from audit firm; perhaps check with them the appropriateness of Non-disclosure;; [21:05:04] invalidthoughtz: if peter is in da key managemnt or has control [21:05:14] invalidthoughtz: 25000 liability of pulp is stated ir not [21:05:48] babar2012: - this is a long standing audit client - so we should have better understanding of their operational affairs; & hence RP; [21:05:59] invalidthoughtz: n determine whether jarvis is a goin concern... i,e is 25000 recoverable or shud v just term it as a irrecoverable debt :P [21:06:14] babar2012: {invalidthoughtz} Good point; [21:06:48] aabubakar: i agree but they said the fig was not material [21:07:15] babar2012: {aabubakar} RP is always material in nature; you said tha earlier on :) [21:07:15] aabubakar: so will it affect GC? [21:07:26] aabubakar: OK I DID [21:07:45] mshaka: ?????????????????????????????????? [21:07:54] aabubakar: but wat shd i say when they stated otherwise [21:08:58] aabubakar: i guess they were wrong and dont even have knowledge or related parties [21:09:03] babar2012: - ok this was not an audit of PULP; remember guys; this was a Review eng; isn't it [21:09:05] aabubakar: of [21:09:12] babar2012: {aabubakar} yes thery were indeed; [21:09:29] linda4: the BALANCE is immaterial but the NATURE is material [21:09:40] babar2012: this is a tricky q's to confuse people; [21:10:15] babar2012: materiality is not really applicable in the sense we're thinking; but with regards to RP its the mere NATURE of it i.e. material; [21:10:24] babar2012: Ok we look good for this part; [21:10:27] babar2012: Moving on then; [21:10:37] aabubakar: they were not supposed to rely soley on the written rep [21:10:47] babar2012: (c) Discuss the quality control issues raised by the audit seniors comments. (3 marks)

[21:11:51] babar2012: The only audit evidence we have requested and obtained is !!!! this is intriguing & questionable; isn't it [21:12:34] babar2012: - May be the Mgt/directors refused to provide further info; [21:12:36] invalidthoughtz: it already has been a year dat it wasnt received so written representations shudnt havnt been given so much reliance n other procedures shud of hav been carried out:P [21:13:34] aabubakar: planning was flawed as they were supposed to identify the risk areas(related party)then design appropriate procedures [21:13:46] babar2012: agree [21:13:48] invalidthoughtz: team was inecperienced or unskilled [21:14:11] aabubakar: {invalidthoughtz} i agree [21:14:53] invalidthoughtz: forstly they cudnt realise da related party nature n den from last year written representation they shud ov realised dat they cudnt solely rely on it [21:14:58] invalidthoughtz: firstly**** [21:15:20] aabubakar: also lack of planned,the more experienced staff assigned to this area of work [21:15:25] babar2012: in line with ISA evidence should be reliable / reasonable / appropriate / sufficient; this is not the case here; [21:15:42] aabubakar: planning [21:15:46] babar2012: - the auditor shuold have looked further then mgt rep; [21:16:02] aabubakar: yes [21:16:30] aabubakar: carry out additional procedures [21:16:39] babar2012: prob more third party evidence is required in this case; i..e some correspondence with Jarvis to confirm the matter further; [21:17:09] aabubakar: external confirmation? [21:17:21] babar2012: Yes - external is more reliable ; [21:17:24] aabubakar: circularisation? [21:17:30] babar2012: yes - circu [21:17:42] saline: hello any one have p7 lsbf video lectures or acces to them ? [21:17:56] babar2012: Tauseef has; [21:18:01] babar2012: i think;

[21:18:20] babar2012: OK guys Well done all; [21:18:34] babar2012: we're now DONE with Q3 of June 2008 [21:18:58] babar2012: only one more paper to go i.e. 2007; & then PILOT paper !!!! ;) [21:19:20] babar2012: WE'll finish off the Past papers i.e. for SEC-B q's [21:19:20] invalidthoughtz: dat was quick [21:19:29] babar2012: next week would be SEC- A ; [21:19:31] invalidthoughtz: i just joined yday [21:19:32] invalidthoughtz: lol [21:19:42] babar2012: lets take a 8 minutes break; [21:20:02] babar2012: & come back for next Q's for tonight; i.e. Q5 of Dec 2007 [21:20:13] babar2012: :) see you in few minutes; [21:20:13] invalidthoughtz: send me da link:P [21:20:18] babar2012: ok [21:20:41] babar2012: {invalidthoughtz} [21:20:44] babar2012: http://www.accaglobal.com/pubs/students/acca/exams/p7/past_papers/int/p7int_2007_dec_q.pdf [21:20:48] invalidthoughtz: thnx [21:30:30] babar2012: OK folks; back to Q5 then; [21:31:03] babar2012: Please read the q's & come back for discussion; or if you have already read it then lets start ?? [21:31:33] babar2012: PS: we'll do PArt- B first; as it looks more straightforward; [21:31:50] babar2012: :? [21:33:16] babar2012: ok please read the q's in come back in 7 minutes; thanks :) [21:34:28] invalidthoughtz: lol [21:34:29] invalidthoughtz: ok [21:41:05] babar2012: ok - lets start firing folks; [21:41:10] babar2012: @ q5;) [21:41:36] babar2012: please dont go away ; come back peeps;

[21:41:48] babar2012: OK [21:41:51] babar2012: (b) Describe the potential benefits for Hugh Co in choosing to have a financial statement audit. (4 marks) [21:42:17] invalidthoughtz: shud i answer or let others answer :P [21:42:31] babar2012: :yes: go ahead [21:42:47] babar2012: anyone [21:43:45] aabubakar: hopes of rapid growth so its better to start having a fi stm audit as hugh co may soon exceed the exemption threshold for small coy audits [21:44:00] babar2012: SPOT ON; [21:44:22] babar2012: - generally speaking to add > reliability of FS users [21:44:33] aabubakar: yes [21:44:56] babar2012: - also when it comes to apply / look for LOAN from Banks / financial insti it will help; will add extra reliability; [21:44:57] aabubakar: also finance providers will need audited accts [21:45:44] babar2012: {invalidthoughtz} plz add your points now; :D [21:46:34] aabubakar: can add value as risk areas will be identified and addressed or any weaknessed in internal controls [21:46:48] babar2012: {aabubakar} certainly [21:47:16] aabubakar: with recommendations on how to overcome-the bye product of the audit [21:48:51] babar2012: - given its a small business RISK [ business ] are inevitable & audit work will definitely come handy in this regard;!!! [21:49:46] babar2012: to categorise the probable risks; short/long terms; operational risks = sucession planning etc [21:49:56] babar2012: we got 5 points; this will suffice [21:50:15] babar2012: (c) With specific reference to Hugh Co, discuss the objective of a review engagement and contrast the level of assurance provided with that provided in an audit of financial statements. (6 marks) [21:50:18] invalidthoughtz: well confidence in out part tym accountant [21:50:18] invalidthoughtz: lol [21:50:24] babar2012: ;)

[21:50:46] invalidthoughtz: we shud undatsnd how imp dat is,.... or all ov us can get kicked out of our jobs [21:50:46] invalidthoughtz: lol [21:51:20] invalidthoughtz: negative assurance.. few procedures [21:51:49] babar2012: Yes - limited trans / range of FS is selected; hence limited assurance [21:51:54] aabubakar: yes i think the part time acctant will benefit 4rm a fin stm auit [21:52:23] babar2012: Objective of review eng ? [21:54:32] invalidthoughtz: evryone asleep [21:54:33] invalidthoughtz: :P [21:54:45] aabubakar: to state that nothing has come to his/her attention that causing him/her to believe thae FS has not been prepared with an applicable reporting framework [21:54:47] babar2012: - to provide assurance on the assumption that FS are free from material misstatements; & nothing has come to the attention of the accountant to prove that assumption; [21:55:03] aabubakar: in accordance with [21:55:08] babar2012: during the course of the review eng; [21:56:04] babar2012: *dis-prove [21:56:23] babar2012: {aabubakar} agreed [21:56:51] babar2012: {invalidthoughtz} yes agreed too :cry: :yes: [21:58:13] aabubakar: a review will be less expensive for Hugh co as less procedures will be carried out and better for him as his cash is invested in growth [21:58:47] aabubakar: or he has limited cash [21:59:11] babar2012: discuss the objective of a review engagement and contrast the level of assurance provided with that provided in an audit of financial statements ? [21:59:29] babar2012: sorr [21:59:32] babar2012: sorry [21:59:39] babar2012: only meant o paste this part; [21:59:42] babar2012: contrast the level of assurance provided with that provided in an audit of financial statements ? [22:00:02] keano007: negative assurance

[22:00:19] keano007: ie we cant see anything that would cause us to disagree [22:00:46] babar2012: all assurance eng. have inherent limitations in them; whther it be audit/review; due to samples of financial data being selected during these eng; [22:01:51] babar2012: - the final responsiblility of preparing FS lies with the Mgt of the entity; [22:02:01] aabubakar: audit of FS gives positive assurance or a reasonable level of assurance [22:02:46] babar2012: true; [22:04:02] babar2012: anymore diff; *22:05:45+ babar2012: (a) Evaluate whether the audit seniors proposed audit report is appropriate, and where you disagree with the proposed report, recommend the amendment necessary to the audit report of: (i) Alpha Co; (6 marks) [22:08:06] aabubakar: this has to do with IFRS 5 HFS NCA and Dis Operations [22:08:40] babar2012: {aabubakar} ok [22:09:21] aabubakar: does the dis ops represent aseperate line of biz? [22:09:42] aabubakar: is it a component? [22:10:09] aabubakar: a seperate geographical area? [22:10:14] babar2012: - thisis very technical q's [22:10:27] aabubakar: lol [22:10:33] babar2012: - i put my hands up on this one; [22:10:34] babar2012: ;) [22:10:47] babar2012: as i dont look at answers before coming here; [22:10:54] aabubakar: u cant do that o [22:10:56] invalidthoughtz: now put em down n start writing.... tymz running out [22:10:56] invalidthoughtz: lol [22:11:07] babar2012: we should try n attempt with our knowldge of theory; [22:11:14] babar2012: {invalidthoughtz} ;) [22:11:31] babar2012: ok boss; [22:11:35] aabubakar: well i think which ever one is write disclosure is required [22:11:46] babar2012: {aabubakar} agreed

[22:12:06] invalidthoughtz: llok at da answers or do woteva u want... make sue u undastand wots goin on n remember it... dats da main point :P [22:12:08] aabubakar: and there was no disclosure [22:12:15] babar2012: {aabubakar} but they did in charimains report; not sure if that;ll suffice the IFRS reporting requirements though; as such [22:12:38] aabubakar: no [22:12:46] babar2012: oh yes [22:12:53] babar2012: well done; well spotted [22:13:13] aabubakar: wat the chairman discloses shd also be disclosed in the FS [22:13:19] babar2012: it is NOT: in that case yes - its got to be disclosed in FS; [22:14:02] babar2012: - so i;ll recommend DISCLOSURE should be made in the FS of Alpha; [22:14:28] aabubakar: YES and if mgt refuses? [22:14:29] babar2012: - & if Mgt disagree then [22:14:53] babar2012: - analyse the matter; its understandably Material; isn't it [22:15:04] invalidthoughtz: sure is [22:15:06] aabubakar: qualify wth except for [22:15:09] babar2012: - pervaisive as well [22:15:11] babar2012: isn't it [22:15:27] babar2012: - they're closing down all of their FACTORIES; [22:15:30] aabubakar: u think? [22:15:45] babar2012: - some heavy discontinuence; [22:15:54] invalidthoughtz: dnt seem pervasive :P [22:15:55] aabubakar: ok [22:16:08] babar2012: only suggesting dear; not jumping in to any hasty conclusion as such; [22:16:14] aabubakar: {invalidthoughtz} yes [22:16:41] aabubakar: coz if affects just one aspect [22:16:54] babar2012: see that is up to the individual whatever they think should get on with it; in the real exam you go to prove your point in writing so not a big deal;) [22:17:09] babar2012: *got

[22:17:11] aabubakar: it doesn't render the whole of the FS meaning less [22:18:05] invalidthoughtz: ok lets just kill da question quicktym [22:18:06] invalidthoughtz: lol [22:18:17] invalidthoughtz: cux evryone asleep n i guess i shud dose off is well [22:18:17] invalidthoughtz: lol [22:19:09] aabubakar: lets move on if no more points [22:19:20] aabubakar: {invalidthoughtz} i agree [22:19:55] babar2012: (ii) Deema Co. [22:20:44] babar2012: no provision is necessary as Deema Cos lawyers have stated in writing that the likelihood of the claim succeeding is only possible !!!! [22:20:46] babar2012: not good; [22:21:13] babar2012: - provision should be made; isn't it [22:21:31] babar2012: - ISA 37 [22:21:45] babar2012: - the contingent liab is probable; [22:21:53] babar2012: - quantifiable ? [22:21:58] aabubakar: no can the amt of obligation be measured reliably? [22:21:59] babar2012: - estimated ? [22:22:00] invalidthoughtz: shudnt it made if its probable rather den possible... or m i jus too sleepy :P [22:22:27] babar2012: {invalidthoughtz} ;) you're spot on ; [22:22:41] aabubakar: ok i'm lost here [22:22:45] invalidthoughtz: i hope im sleepy inda exams is well [22:22:45] invalidthoughtz: lol [22:23:03] babar2012: Linda is on holidays on OT :) [22:23:41] aabubakar: {invalidthoughtz} lol [22:23:58] babar2012: so basically we need to apply isa 37 here; & job done; [22:24:06] invalidthoughtz: yep

[22:24:08] invalidthoughtz: all is well [22:24:09] invalidthoughtz: lol [22:24:12] babar2012: i am sure you all know isa 37;; [22:24:30] aabubakar: we do so wats the verdict? [22:24:47] babar2012: the provision should made; [22:24:51] babar2012: arguably; [22:25:18] aabubakar: wat of theEOM [22:25:59] babar2012: other [22:26:09] babar2012: coz its not disclosed in the first place; [22:26:33] aabubakar: EOM is for a matter adequately disclosed and presented [22:26:34] babar2012: or may be not [22:26:38] babar2012: :) [22:26:41] aabubakar: and for uncertainty [22:27:12] babar2012: this's disclosed but if adequately not sure about that [22:27:29] babar2012: what does adequately" implies; anyone knows [22:27:36] babar2012: in this case ; [22:28:15] aabubakar: i think fully explained in the notes to the account [22:28:52] babar2012: - right [22:29:04] babar2012: so - should qualify or let it be like it is for now; [22:29:30] aabubakar: so their EOM is correct? [22:29:59] babar2012: i am not sure ; [22:30:24] babar2012: 50% yes; [22:31:11] aabubakar: i would have said qualify but not sure [22:31:12] invalidthoughtz: now da tym has come to read da answers [22:31:12] invalidthoughtz: lol [22:31:14] invalidthoughtz: hahhhaha [22:31:21] aabubakar: lol

[22:31:24] babar2012: ok folks; she is right [22:31:27] babar2012: excellent work [22:31:29] babar2012: well done all [22:31:35] babar2012: i see you all tomorrow ; [22:31:37] invalidthoughtz: godd nyt [22:31:40] babar2012: shall we change the time [22:31:42] invalidthoughtz: gudnyt [22:31:46] babar2012: n bring it to 7pm Uk time [22:31:53] aabubakar: goodnigt all [22:31:54] babar2012: instead of 8.30pm uk time ? [22:31:56] invalidthoughtz: yea dats oka wid me [22:32:00] aabubakar: no [22:32:10] aabubakar: not ok with me [22:32:11] babar2012: ok then same time tomorrow:) [22:32:18] invalidthoughtz: oka [22:32:20] babar2012: 8.30 PM UK !!! [22:32:20] aabubakar: thanks [22:32:23] babar2012: Good Night !!! [22:32:27] babar2012: :) [22:32:28] aabubakar: goodnight [22:32:31] invalidthoughtz: chao