1. One of your clients is a large jewelry store in downtown Vancouver. The primary reason for the audit is for documenting sales for a lease agreement, and for a small bank loan. The store has been in business for over twenty years, run by a couple, Jan and Jim, close to retirement. Last year, a new manager, Primrose, was hired. Profits boomed as Primrose was put in charge of buying precious stones. Unfortunately, it turned out that Primrose was buying many of her metals and stones from fictitious companies, and was really acting as a fence for stolen goods. Both Primrose and the store have been charged with criminal activities and the store faces a huge fine that could put it out of business. Jan and Jim are furious that you did not detect this criminal activity during your audit. Required: Prepare some points that you could use to discuss with Jan and Jim about the requirements for auditors to detect illegal activities. 2. Joe Grunt, CA is an auditor working on the audit of Nahua Road Construction Ltd. Nahua's management includes a new controller who has little experience in dealing with auditors. Joe's working papers include: Amounts recorded in the general ledger for opening inventory Amounts recorded in the general ledger for dividends paid Amounts recorded in the general ledger for accounts payable Amounts recorded in the gl for salaries paid to executive officers Amounts recorded in the general ledger for wages paid to hourly employees Questions on a change in amortization policy Questions regarding $1,500,000 paid to acquire a new asphalt machine Joe asked to review the minutes of the board of directors' meetings for the year, but the new controller has refused, saying that the minutes are not part of the accounting records and have no bearing on the accuracy of the financial statements. Joe reports to you as the partner of the CA firm conducting the audit. Required a. Would you insist that Joe be given access to the directors' minutes or would you advise Joe to find alternative audit procedures in this case? State your reasons. (2 marks) b. Assume that Joe does obtain access to the minutes of the directors' meetings. For each of the items in his working papers noted above, indicate what evidence would likely be found in the directors' minutes. If the minutes would not have any information for an item, identify the item in your answer. (5 marks) c. If Nahua supports the controller and refuses Joe's access to the minutes, what effect (if any) would this have on the audit report? (2 marks) (Ctrl)