1 You are the audit manager assigned to the audit of All Waste Ltd (AW) for the year ended 31 December 2017. The company is a family-run business and operates in North Leinster. It commenced operations in January 2014 and currently services over 15,000 domestic customers and over 2,000 commercial customers. It is early May 2018. You are about to review the audit work in relation to the year ended 31 December 2017, in advance of meeting with the audit partner at the end of the week. The audit senior has documented the following matters for your attention: 1. The company has historically been in a permanent overdraft situation and the budget for the 2018 calendar year indicated a continued requirement for the overdraft. However, the current overdraft facilities are due to expire at the end of June 2018 and AW has not yet managed to renegotiate them, due to stricter controls and requirements having been brought into their bank's processes since the last renewal date. If an overdraft cannot be arranged, AW may not be a going concern. However, management is confident that a renewal will be negotiated. 2. As part of audit testing on service fee income, it was noted that approximately 120,000 was received in respect of the 2018 calendar year during the period under review. The audit junior documented that this has been recorded as revenue for the year December 2017. ended 31 2017 the dimotor revised the estimated useful life for AW's I 3. At a meeting in December 2017, the directors revised the estimated useful life for AW's plant from 20 years to 10 years. Total cost of the plant at 1 January 2017 was 4 million and accumulated depreciation was 600,000 (3 years @ 200,000 per annum). There were no acquisitions or disposals of plant during the year. The depreciation charge in 2017 has been recorded at 400,000 (4,000,000/10). 4. Two high-specification vehicles at a total value of 250,000 were purchased from Mulkerrin Importers Ltd on 1 January 2017. The brother of the sales director of AW is the proprietor of this venture. No disclosures have been made in respect of this matter in AW's financial statements. 5. Competition in the industry is becoming more intense. Many customers are now switching service provider and are also actively reducing their waste outputs through a combination of recycling and smarter shopping habits. Per discussions with management, the company will have to implement a number of operational changes over the coming months. The only concrete decision made by 31 December 2017 is a redundancy initiative: 10 employees have been informed that they will be made redundant in September 2018, unless there is a marked increase in orders in the interim period. No disclosures have been made in respect of this matter in draft accounts. (Note: the total number of employees registered at 31 December 2017 is 100). I 6. During the year under review, a virus impacted AW's accounting software. This virus effectively destroyed the purchases and payroll records for the first and second quarters. The finance director, Pat, assures you that he has been meticulous in ensuring that the reconstruction of the records was completed by the year-end date. He explains that the creditor controller worked overtime for several weeks to 're-enter' relevant transactions. Materiality has been set at 40,000. Required (a) Document a memo to the audit partner which: (i) outlines briefly what further audit work, if any, should be performed regarding the above individual matters. (ii) describes the potential impact of these individual matters on the audit report pertaining to AW's 2017 financial statements (assuming the directors do not amend the financial statements for any items highlighted above). (iii) sets out relevant journal adjustments where appropriate. 40 marks (b) You note that the audit senor has not completed audit testing in relation to 'undisclosed liabilities'. Outline briefly the key tests which should be completed in advance of partner review. (c) 5 marks The Managing Director of AW is confused as to what 'true and fair view' represents in the annual report. Describe what 'true and fair view' means in the context of the audit engagement. 5 marks