Acct 5002 2020 sem 1 Case Study 0.docx (Protected view) - Word ex Acrobat Tell me what you want to do Enable Editing otected View ACCT 5002 Case Study Semester 1 2020 Part B (45 marks total) You are the senior audit partner auditing Abdul Wahab Enterprise's long-term debt for the year 30 June 2019. Long-term debt is composed of two bond issues, which are due in 10 and 15 years, respectively The debt is held by two insurance companies. You have examined the bond indentures for each issue. The agreement provides that if Abdul Wahab fails to comply with the covenant of the indentures, the debt becomes payable immediately. You identified the following covenants when reviewing the bond indentures 1. The debtor company shall endeavor to maintain a working capital ratio of 2 to 1 at all times, and in any fiscal year following a failure to maintain the said ratio, the company shall restrict compensation of officers to a total of AUD 650,000, Officers include the chairperson of the board and the president. 2. The debtor company shall keep all property that is security for these debt agreements insured against loss by fire to the extent of 100 percent of its fair value. Policies of insurance comprising this protection shall be filed with the trustee 3. The company is required to restrict 40 percent of retained profits from the availability of paying dividends 4. A sinking fand shall be established with the NAB Bank, and sem annual payments of AUD 500,000 shall be deposited in the fund. The bank may, at its discretion, purchase bonds from either issue Required a. Identify the audit procedures you should conduct to determine if the company is in compliance with the bond agreements (30 marks) b. What are the disclosure requirements for the debt in the notes to the financial statements? (15 marks) dNote X9 Acrobat Acc 5002 2020 sem 1 Case Studydocx (Protected view) - Word Tell me what you want to do Erable Editing in Protected View Part A (25 Marks Total) Jalan Puyuh Pty Ltd is a newly incorporated company that has approached your farm to be the auditors of the company. While you were discussing the terms of the engagement with the prospective client, the managing director commented "Why is that your audit report states that you only obtain reasonable Garance for your audit work dren't you supposed to absolutely sure that the financial statements are true and fair?" Required a. The managing director's view that the audit should provide absolute assurance on the financial statements is an example of the expectation gap between audit objectives and users expectations. Do you believe this is a reasonable expectation? Give reasons for your answer (15 marks) b. Apart from the above example related to absolute assurance, what are other examples or areas of the 'expectation gap"? (10 marks) ACCT 5002 C Shady Semester 1 2020 Part B (45 marks total) You are the senior and partner auditing Abdul Wahab Enterprise's long-term debt for the year 30 June 2019. Long-term debt is composed of two bond issues, which are due in 10 and 15 years, respectively The debt is held by two insurance companies. You have examined the bood indentures for each issue Acct 5002 2020 sem 1 Case Study 0.docx (Protected view) - Word ex Acrobat Tell me what you want to do Enable Editing otected View ACCT 5002 Case Study Semester 1 2020 Part B (45 marks total) You are the senior audit partner auditing Abdul Wahab Enterprise's long-term debt for the year 30 June 2019. Long-term debt is composed of two bond issues, which are due in 10 and 15 years, respectively The debt is held by two insurance companies. You have examined the bond indentures for each issue. The agreement provides that if Abdul Wahab fails to comply with the covenant of the indentures, the debt becomes payable immediately. You identified the following covenants when reviewing the bond indentures 1. The debtor company shall endeavor to maintain a working capital ratio of 2 to 1 at all times, and in any fiscal year following a failure to maintain the said ratio, the company shall restrict compensation of officers to a total of AUD 650,000, Officers include the chairperson of the board and the president. 2. The debtor company shall keep all property that is security for these debt agreements insured against loss by fire to the extent of 100 percent of its fair value. Policies of insurance comprising this protection shall be filed with the trustee 3. The company is required to restrict 40 percent of retained profits from the availability of paying dividends 4. A sinking fand shall be established with the NAB Bank, and sem annual payments of AUD 500,000 shall be deposited in the fund. The bank may, at its discretion, purchase bonds from either issue Required a. Identify the audit procedures you should conduct to determine if the company is in compliance with the bond agreements (30 marks) b. What are the disclosure requirements for the debt in the notes to the financial statements? (15 marks) dNote X9 Acrobat Acc 5002 2020 sem 1 Case Studydocx (Protected view) - Word Tell me what you want to do Erable Editing in Protected View Part A (25 Marks Total) Jalan Puyuh Pty Ltd is a newly incorporated company that has approached your farm to be the auditors of the company. While you were discussing the terms of the engagement with the prospective client, the managing director commented "Why is that your audit report states that you only obtain reasonable Garance for your audit work dren't you supposed to absolutely sure that the financial statements are true and fair?" Required a. The managing director's view that the audit should provide absolute assurance on the financial statements is an example of the expectation gap between audit objectives and users expectations. Do you believe this is a reasonable expectation? Give reasons for your answer (15 marks) b. Apart from the above example related to absolute assurance, what are other examples or areas of the 'expectation gap"? (10 marks) ACCT 5002 C Shady Semester 1 2020 Part B (45 marks total) You are the senior and partner auditing Abdul Wahab Enterprise's long-term debt for the year 30 June 2019. Long-term debt is composed of two bond issues, which are due in 10 and 15 years, respectively The debt is held by two insurance companies. You have examined the bood indentures for each issue