A) UP-Link Airlines was given an exclusive right by the Ministry of Aviation (MOA) to provide twice weekly direct flights between Accra and Johannesburg. The introduction of this service has been well advertised as 'efficient and timely' in national newspapers. The journey time between Accra and Johannesburg is expected to be significantly reduced, so as to encourage tourism and business development opportunities in Johannesburg. UP-Link Airlines operates a refurbished 35-year old aircraft which is leased from an international airline and registered with the MOA. The MOA requires that engines be overhauled every two years. Engine overhauls are expected to put the aircraft out of commission for several weeks. The aircraft is configured to carry 15 First Class, 50 Business Class and 76 Economy Class passengers. The aircraft has a package to reserve holding capacity for Johannesburg's numerous horticultural growers (e.g. of cocoa, cashew and fruits) and general cargo. The six-hour journey offers an in-flight movie, a meal, hot and cold drinks and tax-free shopping. All meals are prepared in Accra under a contract with an airport catering company. Passengers are invited to complete a 'satisfaction' questionnaire which is included with the in-flight entertainment and shopping guide. Responses received show that passengers are generally least satisfied with the quality of the food; especially, on the

DC: ACD01-F004

Johannesburg to Accra flight. UP-Link Airlines employs ten full-time cabin crew attendants who are trained in air-stewardship including passenger safety in the event of accident and illness. Flight personnel (the captain and co-pilots) are provided under a contract with the international airline from which the aircraft is leased. At the end of each flight the captain completes a timesheet detailing the crew and actual flight time. UP-Link Airlines was incorporated in South Africa, whose capital town is Johannesburg on March 1, 2017 and now operates in Ghana whose capital town is Accra. Ticket sales are made by UP-Link Airlines and travel agents in South Africa and Ghana. On a number of occasions, Economy seating has been over-booked. Customers who have been affected by this have been accommodated in Business Class as there is much less demand for this, and even less for First Class. Ticket prices for each class depend on many factors, for example, whether the tickets are refundable/non-refundable, exchangeable/non-exchangeable, single or return, mid-week or weekend, and the time of booking. UP-Link's insurance cover includes passenger liability, freight/baggage and compensation insurance. Premiums for passenger liability insurance are determined on the basis of passenger miles flown. Required:

(i) Identify and explain FIVE business risks facing UP-Link Airlines. (5 marks)

(ii) Describe how the risks identified in (a) could be managed and maintained at an acceptable level by

UP-Link Airlines. (5 marks)

(Note. Assume it is 31st December 2017)

(B) You are a manager in the Quality Control Review Department of Veracita & Co, and are currently responsible for reviewing the appropriateness of your firm's proposed auditor's reports on financial statements. The draft financial statements of Unet Group for the year to 30th June 2018 disclose the following notes:

(i) Significant event: During the year, Unet Group sold a significant amount of its business and certain assets (plant and equipment and inventory) and commenced a systematic winding down of its operations. The Group's remaining assets (including property, trade receivables and cash) were sufficient to meet the group's liabilities, as at 30th June 2018.

(ii) Accounting policies: The consolidated financial statements have been prepared under the historical cost convention and in accordance with applicable accounting standards. As described in Note (i), the group has commenced the winding down of its operations and remaining assets have been restated to their net realizable values.

There are no other disclosures relating to the going concern basis although the 'significant event' is referred to in the directors' report under the heading 'principal activities and business review'. Unet Group ceased to trade in October 2018. The auditor's report on Unet Groups financial statements for the year ended 30th June 2017 was unmodified.

Required:

Comment on the suitability or otherwise of an unmodified auditor's report for Unet Group for the year ended 30th June 2018. Your answer should discuss the appropriateness of alternative audit opinions.