Correct answers only.

1.Your audit firm has tendered for the audit of Hekima Group of Companies.

Required:

Evaluate six matters that should be considered before accepting the audit engagement in the

event your firm is successful in the tender.

2. What are the major difficulties with using the IRR and the payback period as project

appraisal techniques?

3.

Jeed Lid. a listed company is an oil producer with interests in North Africa, West Africa and East Africa. Latest interim reports show the following: 31 December 2012 30 June 2013 31 December 201 1 Sh."million" Sh."milion " Sh. million" Revenue 22.000 18,300 37,500 Profit before tax 5.500 4,200 7.500 Total assets 95.900 92,300 Earnings per share (hanleysh.) In October 2012, the company was awarded a five year licence by the Kenyan Government to explore for oil in Northern Kenya. The licence was granted at no cost to iced Lid. However, the management of Jeed Lid. has decided to recognise the licence at an estimated fair value of Sh.30 million- The most significant of Jeed Lid's tangible non-current aweis are its 17 oil rigs (201 1-2022). Each rig is composed of numerous items including a platform, buildings thereon and drilling equipment. The useful life of each platform is assessed annually on factors such as weatherconditions and period over which it is estimated that od will be extracted. Platforms are depreciated on a straight line hasis over 15 to 40 years. A provision for the present valu of the expected decommissioning of an od rig is neogrised in full at the commencement of oil production. One of the rigs in West Africa was extensively damaged in March 2013. Jeed Lid.'s management believes the rig is beyond economic repair and there will be no allemative but to shandon it. This suppetion has brought angry protests from conservationists. In January 2013, iced Lid. entered into an agreement to share in the future comonic benefits of an extensive oil pipeline. You are the manager responsible for the audit of feed Lid. Last year, your firm modified its auditor's report due to lack of evidence to support management schedule of proven and probable oil reserves to be recoverable from known reserves. Required: a. Discuss the audit risks to be addressed when planning the final audit of Joed Lkl. for the year ended 31 March 2013. b. Describe the principal audit work to be performed in respect of the meful lives of lead Lid.A rig platform