QUESTION SIX

Your firm, Castro & Rina, has been auditors of Woolwich FC (Woolwich), a premier league football club, for the past four years. As part of the audit engagement team, you joined the engagement partner at a meeting with the finance director of Woolwich, Sheila Parker, to discuss preparations for the audit of the financial statements for the year ended 30 June 2021. During the discussion the finance director made the following requests:

(i) The Senior Accountant of Woolwich resigned at the beginning of June 2021 and a replacement has not yet been made. This has had a knock-on effect on finalising the financial statements on time. Sheila has requested Castro & Rina to second an experienced staff to Woolwich to perform accounting and finance roles until a permanent Senior Accountant was appointed.

(ii) Several complex adjustments were pending, regarding treatment of players transfer fees paid into an offshore bank account and Sheila would like the audit team to advise on the appropriate treatment. This exercise should be billed separately from the audit fee.

(iii) The audit timetable should be hastened so that the audit report should be ready by the end of July 2021, to enable Woolwich to complete the processes for the issue of new shares by the end of August 2021. Sheila suggested that since the auditors have not found any problems with the previous years audits, and Woolwichs internal auditor was well qualified, Castro & Rina should rely on the work already done by the internal auditor in relation to verification of property, plant and equipment to save duplication of efforts and consequently make savings on the audit fee.

(iv) As Castro & Rina were already conversant with the operations and financial affairs of Woolwich, the audit firm should be part of the team to assist with the preparation of the prospectus for the issue of new shares referred to in (iii) above.

(v) In order to promote social interaction, Woolwich was offering the audit engagement team tickets to the directors box to watch a top billed clash between Woolwich FC and its city rival, Shoreditch FC. In addition, each audit engagement team member could have an unsigned jersey of their favourite player. Both items would be given out free of charge.

Present your answers in a table in a Table with the following THREE (3) headings: Item Number (i-v), Nature & Explanation of Threat and Response/Safeguard Suggested.

Answers should cite relevant standards and provide examples, where appropriate.