Question 12 You are planning the audit of Budget Pty Ltd, which is a subsidiary of Premium Ltd. It was established to provide the group with access to the wine glut and has sustained significant losses and has a negative cash flow. The CEO of Budget Pty Ltd, Anne Hale, has indicated that there is nothing to worry about as Premium Ltd has signed an agreement to suppor Budget Pty Ltd has an internal audit function that is attached to the accounting and finance division, and reports directly to the finance direct During your review of internal audit. you have noted the following matters: The staff of the internal audit function changed significantly during the year. The division employed three new staff to undertake the testing concentrated on the performance auditing schedule of the internal audit function. The new staff had no previous auditor accounting experie on The work that has been documented appears to be quite thorough and competent. However, for some of the audit tests prescribed, the st the audit program and noted that the test has been satisfactorily performed. Required: a. Outline your assessment of the appropriateness of the going concern basis for Budget Pty Ltd. Justify your assessment. (2 marks) b. Indicate three (3) audit procedures that you would undertake to confirm your assessment in (a) above. (6 marks) c. What factors do external auditors generally consider before determining whether the work of the internal audit function can be relied d. Based on the information in the question above, provide your assessment as to whether the external auditor can rely on the work of in e. is the external auditor's responsibility for the audit opinion expressed reduced when the external auditor uses the work of the internal 12 10 10 Novesti 12 of 14 points SA which is a subsidiary of Premium Ltd. It was established to provide the group with access to the growing budget wine market. However, Budget Pty Ltd has found trading conditions difficult due to the current and has a negative cash flow. licated that there is nothing to worry about as Premiumhuspedagement to support the company for as long as it to tabia presence in the budget wine market tutin tached to the accounting and finance port dicty to the finance redor dacity of the audit committee nated the following dignificantly during the year. The vision played the new staff to undertake the testing the financial accounting While the more senior personnel who had previously done these tests Schedule of the intendit function. The new had no previous auditor accounting experience as to be quite through and competent. However, for some of the tests prescribed the sta hoceted documentation of the work that has been completed. They are simply titled as been factory performed priateness of the going concern basis for Budget Pty industify your assessment car ut you would understocolm your en above erally consider before determining whether the work of the internal audit function can breed upon for thes of the diaries nabor provide your sessment as to whether the external toran rely on the work of emal audit ca marko for the audition pressed reduced when the external auditor uses the work of the internaut funtion on the mental +10 M A EE P 2 X a NI MI III X X SS thing 12 Ion 12014 18 points y of Premium Ltd. It was established to provide the group with access to the growing budget wine market. However. Budget Pty Ltd has found trading conditions difficult due to their cash flow nothing to worry about as Premium Ltd has signed an agreement to support the company for as long as it takes to establish a presence in the budget wine market the accounting and finance division and reports directly to the finance director in his capacity as chair of the audit committee ng matters uring the year. The division employed three new staff to undertake the testing of the financal accounting records, while the more senior personnel who had previous done these tests nal audit function. The new staff had no previous auditor accounting experience orough and competent. However, for some of the audit tests prescribed the staff are not prepared detailed documentation of the work that has been completed. They have simply intale ay performed going concern basis for Budget Pty Ltd. Justify your assessment (2 marks) take to confirm your assessment in a) above (6 marks) ore determining whether the work of the internal audit function can be relied upon for the purposes of the audit? (4 marks) e your assessment as to whether the external auditor can rely on the work of intema audit. Give reasons. (4 marke on expressed reduced when the external auditor uses the work of the internal audit function on the engagement are 11 TE X, CH $ YO > 14px EEA 2 I. Question 12 You are planning the audit of Budget Pty Ltd, which is a subsidiary of Premium Ltd. It was established to provide the group with access to the wine glut and has sustained significant losses and has a negative cash flow. The CEO of Budget Pty Ltd, Anne Hale, has indicated that there is nothing to worry about as Premium Ltd has signed an agreement to suppor Budget Pty Ltd has an internal audit function that is attached to the accounting and finance division, and reports directly to the finance direct During your review of internal audit. you have noted the following matters: The staff of the internal audit function changed significantly during the year. The division employed three new staff to undertake the testing concentrated on the performance auditing schedule of the internal audit function. The new staff had no previous auditor accounting experie on The work that has been documented appears to be quite thorough and competent. However, for some of the audit tests prescribed, the st the audit program and noted that the test has been satisfactorily performed. Required: a. Outline your assessment of the appropriateness of the going concern basis for Budget Pty Ltd. Justify your assessment. (2 marks) b. Indicate three (3) audit procedures that you would undertake to confirm your assessment in (a) above. (6 marks) c. What factors do external auditors generally consider before determining whether the work of the internal audit function can be relied d. Based on the information in the question above, provide your assessment as to whether the external auditor can rely on the work of in e. is the external auditor's responsibility for the audit opinion expressed reduced when the external auditor uses the work of the internal 12 10 10 Novesti 12 of 14 points SA which is a subsidiary of Premium Ltd. It was established to provide the group with access to the growing budget wine market. However, Budget Pty Ltd has found trading conditions difficult due to the current and has a negative cash flow. licated that there is nothing to worry about as Premiumhuspedagement to support the company for as long as it to tabia presence in the budget wine market tutin tached to the accounting and finance port dicty to the finance redor dacity of the audit committee nated the following dignificantly during the year. The vision played the new staff to undertake the testing the financial accounting While the more senior personnel who had previously done these tests Schedule of the intendit function. The new had no previous auditor accounting experience as to be quite through and competent. However, for some of the tests prescribed the sta hoceted documentation of the work that has been completed. They are simply titled as been factory performed priateness of the going concern basis for Budget Pty industify your assessment car ut you would understocolm your en above erally consider before determining whether the work of the internal audit function can breed upon for thes of the diaries nabor provide your sessment as to whether the external toran rely on the work of emal audit ca marko for the audition pressed reduced when the external auditor uses the work of the internaut funtion on the mental +10 M A EE P 2 X a NI MI III X X SS thing 12 Ion 12014 18 points y of Premium Ltd. It was established to provide the group with access to the growing budget wine market. However. Budget Pty Ltd has found trading conditions difficult due to their cash flow nothing to worry about as Premium Ltd has signed an agreement to support the company for as long as it takes to establish a presence in the budget wine market the accounting and finance division and reports directly to the finance director in his capacity as chair of the audit committee ng matters uring the year. The division employed three new staff to undertake the testing of the financal accounting records, while the more senior personnel who had previous done these tests nal audit function. The new staff had no previous auditor accounting experience orough and competent. However, for some of the audit tests prescribed the staff are not prepared detailed documentation of the work that has been completed. They have simply intale ay performed going concern basis for Budget Pty Ltd. Justify your assessment (2 marks) take to confirm your assessment in a) above (6 marks) ore determining whether the work of the internal audit function can be relied upon for the purposes of the audit? (4 marks) e your assessment as to whether the external auditor can rely on the work of intema audit. Give reasons. (4 marke on expressed reduced when the external auditor uses the work of the internal audit function on the engagement are 11 TE X, CH $ YO > 14px EEA 2