[20:32:03] balbina: Juliet Dec 2010 [20:32:11] omer321: ohh [20:32:24] omer321: is it romantic [20:32:37] omer321: :d [20:32:44] geoklean:

always!! while reading p7!!! :) [20:33:00] balbina: {omer321} we are all in romantic mood... [20:33:08] geoklean: lol [20:33:41] geoklean: we all love our books!! yes? :D [20:34:14] balbina: full of colours [20:34:52] geoklean: mine is just grey :| [20:35:06] balbina: do more Qs :) [20:35:10] omer321: lol [20:35:51] omer321: whose leading the discussion [20:36:07] geoklean: our boss is balbina :) [20:36:14] balbina: me? [20:36:19] balbina: ok [20:36:44] geoklean: yea girl..you do it good..so continue [20:36:46] balbina: read what Juliet wants to tell you [20:37:03] omer321: what does she wants [20:37:21] omer321: except a romeo [20:37:25] balbina: good attitute, first read requirements then scenario [20:37:53] geoklean: always, so we know what we are looking for in the scenario [20:38:26] geoklean: aaaa!! balbi!! i forgot to tell you! [20:38:28] omer321: its the worldly scenario that creates problems for these love birds [20:38:40] geoklean: there are webinars from Kaplan..for p3 and p7 [20:39:10] geoklean: for exam tips and techniques [20:39:16] balbina: ooo

[20:39:20] balbina: from kaplan [20:39:25] geoklean: yep [20:39:33] balbina: i knoe thre is smth from bpp or acca as well [20:39:42] geoklean: tell me your email i will forward you them [20:39:44] balbina: then is it? [20:39:57] geoklean: a! is from acca [20:40:01] geoklean: not kaplan..sorry [20:40:08] zxmanzx: {omer321} {geoklean} {balbina} i was reading P4 question no 22 NOT P7 imagine the status i reached [20:40:25] balbina: {zxmanzx} LOOOOOOOOOOOOOL [20:40:40] balbina: :star: [20:41:02] balbina: {geoklean} when is it? [20:41:40] geoklean: on 19th [20:41:42] geoklean: both [20:42:05] geoklean: {zxmanzx} You need to relax!!!! [20:42:14] geoklean: put some music maybe [20:42:31] geoklean: and drink less coffee ;) [20:43:43] balbina: p3 i m able to join [20:43:56] balbina: p7 difficult its noon for me [20:44:05] zxmanzx: {geoklean} i drink a lot of earl gray tea and coffee and nescafe [20:44:22] balbina: ok read Juliet? [20:44:27] balbina: done with Juliet? [20:44:33] zxmanzx: {geoklean} can you send me the webinars [20:44:36] balbina: can we start answering? [20:44:50] geoklean: yes..tell me your email on priv. [20:45:07] geoklean: {balbina} yes [20:45:51] balbina: ok as long you read it you find it romantic [20:46:03] balbina: its sad story

[20:46:18] omer321: love stories are sad [20:46:22] balbina: Juliet finds many difficulties [20:46:29] omer321: typical [20:46:43] balbina: part a [20:47:45] balbina: so last year it was unmodified opinion, and should GC be highlighted [20:47:57] balbina: do we agree with this statement? [20:48:01] balbina: discuss... [20:49:06] zxmanzx: auditor should highlight in his report and modify his report in the following cases - modify by emphasis of matter paragrah if there is significant doubt about going concern which has been disclosed prpoerly [20:49:25] balbina: {zxmanzx} yep [20:49:37] zxmanzx: and qulaified report if this have not been disclosed adequately [20:50:15] balbina: {zxmanzx} should we comment in this case? [20:50:31] balbina: i understand it that auditor didnt consider GC issue [20:50:42] zxmanzx: but we have to note that auditor has to examoine the sb till the signing of the report only [20:51:31] balbina: need to examine, correct [20:51:52] balbina: need to consider GC issue case [20:51:54] geoklean: sb? [20:51:59] balbina: sb? [20:52:42] zxmanzx: no it means that the company failed after signing the report [20:53:04] zxmanzx: subsequent events [20:53:16] zxmanzx: =sb [20:53:49] balbina: failed? [20:53:59] balbina: what do you mean by failed? [20:55:25] geoklean: {balbina} he is saying that the auditor need to examine about subsequent events. if the company fails after that, is not the auditor's responsibility. ...? [20:55:36] geoklean: {zxmanzx} ? [20:56:18] balbina: its not auditor responsibility whether company fail or not

[20:56:37] zxmanzx: {geoklean} right [20:57:07] geoklean: {balbina} no, but he is responsible to examine other matters and do the audit work correct [20:57:12] geoklean: like risk assessment [20:58:02] geoklean: em..no [20:58:06] zxmanzx: it depends upon the level of going concern uncertainties and the level of adequate disclosure in the FSs . in brief [20:58:34] zxmanzx: by the way there is new article of p7 touches that point [20:58:56] balbina: can u send us link please [20:59:30] balbina: {geoklean} yep, the auditor should done his work with higher quality [20:59:45] balbina: GC is material thing [20:59:46] geoklean: the auditor is responsible in perform an assessment of risk management procedures, but it is not his fault if these procedures of the management for risk are inadequate [21:00:03] balbina: {geoklean} yes [21:00:14] balbina: its management responsibility to do so [21:00:30] balbina: management should consider GC issue [21:00:52] balbina: whenever company is able to survive within next 12 months [21:01:06] geoklean: and the auditor needs to examine it [21:01:08] balbina: and disclose it [21:01:11] balbina: {geoklean} yes [21:01:19] geoklean: ok [21:01:50] balbina: and GC issue should be written in EoM paragraph [21:01:58] balbina: and auditor report modified [21:02:11] zxmanzx: {balbina} but auditor should assess the reasonability of such assessment and even he has to do additional work such as ratio analysis, review subsequent FSs prepared by mgt [21:02:25] balbina: {zxmanzx} greta [21:02:58] geoklean: balbi? audit Report modified? the opinion? [21:03:19] balbina: audit opinion modified [21:03:26] balbina: not report

[21:03:45] balbina: should have been stated I mean [21:03:58] geoklean: ok [21:04:13] balbina: part b [21:04:26] balbina: identify and explain [21:04:39] balbina: matters to be considered [21:05:10] balbina: they have GC issue [21:05:22] balbina: decreasing sales [21:05:41] balbina: decreasing profitability [21:06:45] zxmanzx: {balbina} no i think he talks about the matters we should consider when we review the forecasts [21:07:29] seagoat: going concern issue looks into company able to maintain doing business in at least next 12 months [21:07:31] balbina: what is the difference between foreacst and projection [21:07:40] hellohowlowlo: forecasts are for 1 year [21:07:44] hellohowlowlo: projection are longer [21:07:50] hellohowlowlo: also forecasts are best estimates only [21:08:00] hellohowlowlo: where projection also uses hypothetical [21:08:12] balbina: {hellohowlowlo} thank you [21:08:25] balbina: also forecast is made on assumptions of managenet [21:08:28] balbina: management [21:08:41] balbina: what they think they will do [21:09:19] seagoat: auditor should review management assumptions in order to give a view on their reasonablness [21:09:45] balbina: {seagoat} :) [21:10:00] seagoat: bcoz if assumptions are out of the blue [21:10:06] zxmanzx: the competent of the projection preparer [21:10:11] seagoat: and based on this mngmt is saying there is going concern [21:10:14] seagoat: the auditor says [21:10:20] seagoat: "NO"

[21:10:36] zxmanzx: compare the assumptions with the industry forecasts [21:11:22] zxmanzx: check footing and refrencing of the report [21:11:44] balbina: bank require our advise on forecast, what kind of assurance can we provide? [21:11:52] zxmanzx: none [21:11:56] zxmanzx: {balbina} none [21:12:03] balbina: negative? [21:12:13] balbina: limited? [21:13:23] balbina: anyone? [21:13:30] seagoat: we can provide assurance [21:13:37] seagoat: similarly as we provide assurance to shareholders [21:13:39] balbina: what kind? [21:13:51] zxmanzx: {balbina} no assurance [21:13:53] balbina: {seagoat} nope [21:14:12] balbina: to shareholders we give reasonable assurance [21:14:22] balbina: whethere fs show true and fair view [21:14:34] balbina: fs are historical data [21:14:43] balbina: forecast is future [21:14:50] seagoat: based on historical data [21:15:01] balbina: can we give assurance to predictions? [21:15:04] balbina: assumptions? [21:15:26] seagoat: in my opinion yes [21:15:52] balbina: in mine too [21:15:59] balbina: but it is limited assurance [21:16:10] balbina: nothing has come into our attention [21:16:23] seagoat: yes [21:16:24] balbina: let me check in my notes [21:16:29] seagoat: seems legit

[21:17:30] geoklean: negative assurance [21:18:08] seagoat: indeed [21:18:21] zxmanzx: {balbina} {geoklean} no , no assurance is provided in that case and we state in our report that the projections are made by managment only [21:18:56] balbina: {zxmanzx} in Juliet? [21:20:31] zxmanzx: {balbina} yes even if the auditor attend the meeting he should state that he does not guarantee in any way the results of the projections or the assumtiopns and it is the mgt responsibility [21:21:14] balbina: limited assurance is not a quarantee [21:21:29] seagoat: no assurance is a guarantee [21:21:53] seagoat: financial statements are also prepared by management only [21:22:02] balbina: right [21:22:28] seagoat: i think there is nothing wrong [21:22:35] seagoat: if auditor provides negative assurance [21:22:38] seagoat: to forecast [21:22:46] balbina: but auditor state opinion whenever fs are free from material misstatements [21:23:09] zxmanzx: {balbina} limited assurance/ negative assurance is provided only in the case of limited review [21:23:11] seagoat: ok that is positive assurance [21:23:20] balbina: in the case, Juliet has decreasing sales [21:23:25] seagoat: we should ask the tutor [21:23:26] seagoat: :D [21:23:28] seagoat: on OT [21:24:31] balbina: wants to provide reductions, provide new technology so needs loan from bank [21:24:39] balbina: significant loan [21:25:00] balbina: it seems Juliet is desperated [21:25:29] balbina: so what audit procedures would you suggest [21:26:48] balbina: when client wants a loan, do we know why? what for? if he is able to pay it back? [21:27:14] zxmanzx: {balbina} agree

[21:27:14] geoklean: written representation confirming the assumptions used are considered under the crisis [21:27:25] zxmanzx: {geoklean} agree [21:27:27] balbina: {geoklean} great, assumptions of mngt [21:27:49] balbina: easy thing talk to mngt [21:27:58] geoklean: is the loan sufficient to the costs to be covered? [21:28:05] balbina: great [21:28:17] balbina: how will they pay it back? [21:28:27] geoklean: yes [21:28:44] geoklean: and what about the company's history on older loans? [21:28:51] balbina: great [21:29:18] balbina: loan, forecast ---> lots of discussion with mngt [21:29:25] geoklean: of course obtain and review the forecasts and projections first :| [21:29:34] balbina: with forecast lots of discussion with mngt [21:29:51] balbina: preform ratio analysis [21:30:31] seagoat: PBIT / Interest [21:30:33] balbina: part ii [21:30:40] balbina: {seagoat} oo go ahead [21:30:58] seagoat: no no [21:31:02] balbina: yes yes [21:31:09] seagoat: just giving example of what ratio would be appropriate [21:31:21] balbina: ok [21:31:26] balbina: part ii [21:31:48] balbina: ethical matters of providing advice on forecast and projections [21:32:04] balbina: {seagoat} its your scope, just on forecast [21:32:54] seagoat: this one is tricky [21:33:14] seagoat: since we are advising directly the managament [21:33:30] seagoat: in my opinion there is no threat of taking over the management role

[21:33:40] balbina: yes, company obviously has GC issue and we are asked to give assurance on forecast, so company can receive loan [21:34:08] balbina: {seagoat} you are not taking mngt role [21:34:13] seagoat: although [21:34:16] balbina: you give limited assurace [21:34:33] seagoat: i would consider the risk of self review [21:34:38] balbina: expectation gap might be find here [21:34:58] balbina: no self review threat [21:35:06] seagoat: ok [21:35:18] balbina: none of 5 threats [21:36:29] balbina: hmmm maybe u r right [21:36:38] balbina: ethical matters [21:36:52] balbina: ethic - threats of ethic [21:37:24] poswal11: Hi all [21:37:37] balbina: {poswal11} hi [21:38:28] balbina: we are talking about auditors advice on forecast, company is applying for loan, but company is facing GC issue [21:38:35] geoklean: seagoat is right [21:38:59] seagoat: let me right smth [21:39:05] geoklean: there is also advocacy threat also [21:39:15] seagoat: A management threat exists when the audit firm undertakes work that involves making judgements and taking decisions that should be the responsibility of management [21:39:21] poswal11: ok u guys carry on i will give my input (try) [21:40:35] seagoat: advocacy is rather when auditor is taking a side when 3rd party is engaged [21:40:43] seagoat: its rather external matter of company [21:40:45] seagoat: than internal [21:41:41] geoklean: yes

[21:41:59] poswal11: {seagoat} no advocacy exist when we unable to maintain appropriate balance to our client either with him proactively or against him in both cases [21:42:34] balbina: {poswal11} u mean safeguards? [21:42:38] geoklean: well if the auditor attend the meeting..it can easily be an advocacy threat also [21:42:51] poswal11: {balbina} no [21:43:28] geoklean: {poswal11} the company asked the auditor to attend a meeting with the bank to obtain a loan [21:43:40] geoklean: we are doing a question :) [21:43:42] poswal11: {geoklean} advocacy represent the extreme situations like defending client in the court cases or sue him [21:44:08] poswal11: {geoklean} ok ok sorry u guys carry on me remain out [21:44:21] geoklean: court cases is an extreme example of it [21:44:26] seagoat: ok [21:44:35] seagoat: it doesnt matter [21:44:38] geoklean: what about meeting to obtain a loan? [21:44:38] seagoat: :) [21:44:56] seagoat: ohhh [21:44:57] seagoat: listen [21:45:08] seagoat: if the company [21:45:11] seagoat: asked auditor [21:45:11] poswal11: Do u guys want me give me my input? [21:45:13] seagoat: to attend [21:45:20] seagoat: the auditor should REFUSE [21:45:35] seagoat: because from the bank point of view he would be seen as a management role [21:45:55] geoklean: {poswal11} yes..i didnt told you not to :| just gave you info for what we are talking about [21:45:58] poswal11: But we sh [21:47:40] poswal11: But we should make things clearer before taking an appointment for eg the kind of audit report we will produce,communication with bank(make them clear there will be no duty of care if company goes liquidate etc

[21:48:35] seagoat: auditor should refuse taking part in the meeting with bank [21:48:37] balbina: {poswal11} good point [21:49:19] geoklean: {poswal11} limiting expectation gap [21:49:34] geoklean: ? [21:49:56] poswal11: {seagoat} yeah there is no point to attend meeting with the bank but in case if we attend then we should not act like a managers [21:50:11] poswal11: {geoklean} ellaborate plz [21:50:24] seagoat: well [21:50:30] seagoat: if we are bad actors [21:50:36] seagoat: we would be seen as managament [21:50:37] seagoat: :D [21:51:03] poswal11: {seagoat} these are quite bookish real world is quite different [21:51:43] geoklean: {poswal11} auditors should make clear to the clients about what responsibilities are there, so no misundersdanings... [21:51:52] poswal11: true [21:52:16] poswal11: all things will be covered before going into engagement [21:53:56] poswal11: All of the above we need to coney to the client the kind of testing will be performed as it is not full we will mainly concern for analytical and enquires will not bother much [21:54:17] poswal11: *full audit [21:55:25] balbina: i guess we are done with the Q :) [21:55:30] seagoat: yes [21:55:40] seagoat: some relevant and good points were stated [21:55:44] balbina: we are done with Juliet [21:55:45] seagoat: everyone would write smth [21:55:56] seagoat: we should also bare in mind [21:55:57] balbina: it was nice discussion :) [21:56:01] seagoat: how many marks are available [21:56:09] seagoat: for each part [21:56:31] geoklean: it was 8 marks for part a

[21:56:44] seagoat: and distribution i / ii ? [21:56:46] geoklean: b.i. 6 markas and 6 for b.ii [21:57:08] seagoat: ok ok [21:58:30] balbina: I need to say it was not rocket science [21:58:59] balbina: but sometimes surprising [21:59:15] poswal11: easy peasy lemon squeezy [22:00:03] geoklean: {poswal11} really?? p7 seems to me like a huuuuge mountain!! [22:00:26] geoklean: endless [22:00:52] poswal11: {geoklean} i got passed thats why i am bragging but jokes apart it is a tough task