Question
Your firm is about to commence the audit of a new client, 'There For You' (TFY), which is a charity with a 30 April 2020
Your firm is about to commence the audit of a new client, 'There For You' (TFY), which is a charity with a 30 April 2020 year end. TFY raises money through a national chain of thirty shops which sell household items, as well as new items purchased by TFY. Each shop employs a manager who is assisted by unpaid volunteers. The charity runs a small head office including one accountant who maintains all accounting records, pays suppliers and drafts the financial statements for your firm to audit. Each day the managers bank the takings for their shops and send the details to the accountant.
Required: a) Discuss the differences between auditing a not-for-profit organisation compared to a profit orientated company. (8 marks)
b) Discuss two weaknesses in internal control which exist in TFY. (4 marks)
A donor has given TFY a piece of land which the charity wishes to carry at fair value in the financial statements. TFY has appointed a surveyor to value the land.
Required: c) i. Discuss whether it is appropriate for the auditor to place reliance on the work of an external expert as part of the audit. (2 marks)
ii. Explain the assessments which the auditor must make before reliance is placed on the surveyor's valuation. (4 marks)
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