ACC304 Accounting Final Year Project S2 AY 2021/2022
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Case Report B (Auditing) — Individual Assignment
Due date: SUNDAY, MAY 22nd, 2022 ASSESSMENT
Weighting:
Length
40%
Approximately 2500 (+/- 10%) words 2

Objectives

This assessment item relates to ALL module learning outcomes (LOs) as stated on pages 4-
5 of ACC304 Module Handbook.

LOs ACC304 Learning Outcomes AICPA Core Competence (*)
A Select and appraise financial and non-
financial information from different sources
✓ Measurement (Functional)
✓ Strategic and Critical Thinking (Broad
Business Perspective)
✓ Industry and Sector Perspective
(Broad Business Perspective)
B Choose appropriate analytical techniques
to describe, interpret, and draw inferences
on, data
✓ Strategic and Critical Thinking (Broad
Business Perspective)
✓ Problem Solving (Personal)
✓ Research (Functional)
C Exercise professional scepticism and
judgement in order to deal with complex
and conflicting accounting situations
✓ Problem Solving (Personal)
✓ Professional Demeanor (Personal)
✓ Decision making (Personal)
✓ Risk Analysis (Functional)
✓ Measurement (Functional)
D Recognise the main issues concerning
corporate governance, social
responsibility, and compliance with the
reigning regulations
✓ Legal/Regularity Perspective (Broad
Business Perspective)
✓ Decision making (Personal)
✓ Research (Functional)
E Possess commercial awareness and
articulate business recommendations
✓ Strategic/Critical Thinking (Broad
Business Perspective)
✓ Industry and Sector Perspective
(Broad Business Perspective)
✓ Resource Management (Broad
Business Perspective)
✓ Marketing/Client Focus (Broad
Business Perspective)
F Solve problems in creative and innovative
ways
✓ Problem Solving & Decision making
(Personal)
✓ Project Management (Personal)
G Demonstrate oral and written
communication skills
✓ Communication (Personal)
✓ Reporting (Functional)
ACC304 Accounting Final Year Project S2 AY 2021/2022
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H Engage in reflective, critical, and
independent thinking
✓ Problem Solving & Decision making
(Personal)
✓ Project Management (Personal)
✓ Leverage technology to Develop and
Enhance Personal Competencies
(Personal)
✓ Research (Functional)
(*) The American Institute for Certified Public Accountants Core Competency Framework is available
at: http://www.aicpa.org/interestareas/accountingeducation/resources/pages/corecompetency.aspx


Presenting Written Work for Assessment
Presenting your academic report (Approximately 2500 words) professionally is important.
The following is a guideline relating to presentation and submission of written assignments:
o This assignment is required to be on A4 paper and word-processed in 12 font Times
New Roman or Arial with a minimum of 1.5-line spacing.

o All pages are to be numbered. Your student number should appear on each page.

o Reports that exceed the word limit by more than 10% will be penalised.

o The assignment should include a cover sheet (a template is provided on Learning Mall)
showing the programme title, module number and name, title of the assignment, the
name and number of the student submitting the work and submission date.

o Margins should be as follows: Top: 1 inch, Bottom: 1 inch (2.5 cm), Left: 1.25 inches,
right: 1.25 inches (3.2 cm).

o Work should be in English (UK) and grammatically correct with careful attention to
sentence construction, syntax, and spelling.

o The Harvard referencing system must be used wherever the work of others is cited, and
all sources should be acknowledged (Refer to Referencing Guidelines which are
available from the library): http://libguides.lib.xjtlu.edu.cn/ld.php?content_id=5887149

o The marking scheme is also flexible enough to cater for comments that may not appear
in the ‘model answer’.

o Please keep a copy of your work and be able to produce it upon demand.

o Please upload your draft submission and final submission onto LMO well before the
deadlines in case of unforeseen circumstances and to pre-empt late submissions.

o You should name your files as per the following format:
StudentID_Name of Report.docx; for example, 1234567_Report_A.docx.

o The assessment rubric of the written report and oral presentation is uploaded to the
module page of LMO.

o Opportunity for the re-sitting of both written reports and oral presentation is not available.

ACC304 Accounting Final Year Project S2 AY 2021/2022
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Details
Stage 1 – understanding the requirement

Suppose you have completed your BA and joined TRUST & Co, a small firm of CPA, which
specialises in providing audits and financial statement reviews for small to medium-sized
companies. Your main role is to evaluate the business performance for listed companies and
provide the clients with your investment recommendations and advice. Recently, your
manager assigned you the role to prepare a report, in which you identify and evaluate the
professional, ethical, and other issues raised in deciding whether to accept the appointment
as provider of an assurance opinion as requested by World For Pets Co.

Thus, you are responsible for evaluating potential assurance engagements, and for
producing a brief report on each prospective piece of work to be used by your manager
when deciding whether to accept or decline the engagement. TRUST & Co is keen to
expand the assurance services offered, as a replacement for revenue lost from the many
small-company clients choosing not to have a statutory audit in recent years. It is currently
May 2022.

Please view and read related materials which will be posted @ LMO, including the ISA
(https://www.ifac.org/system/files/publications/files/A010%202013%20IAASB%20Handbook
%20ISA%20220.pdf), ISQC (https://www.ifac.org/system/files/downloads/a007-2010-iaasb-
handbook-isqc-1.pdf) and/or any other standard/ethical code/rule/law as they may help you
(see for example: https://www.thecaq.org/wp-content/uploads/2020/06/caq_role-of-the-
auditor-in-company-prepared-esg-information_2020-06.pdf).

The requirement asks you to consider professional, ethical, and other issues. This could
cover a wide range of considerations, such as:
• ethics: independence, competence, conflicts of interest, confidentiality, assessing
integrity,
• professional issues: the risk profile of the work requested, the fee – and whether it
is sufficient to compensate for high risk, availability of staff, managing client
expectations, logistical matters such as timing, legal and regulatory matters – such
as money laundering, and (in some cases) obtaining professional clearance, and
• other issues: whether the work ‘fits’ with the commercial strategy of the audit firm,
the potential knock-on effect of taking on the work – such as the impact on other
clients, or on other work performed for this client.

You are asked to produce a report, so remember that the marks available will be awarded
for using the correct format, the use of professional business language, and for presenting
your comments as a logical flow culminating in a conclusion.

From reading the requirement, you know that the question scenario will be based on a
potential assurance assignment and will be broadly based around acceptance issues.

Stage 2 – reading the scenario

• When reading through the detail of the scenario, you should now be alert to
information relevant to this requirement.

• Highlight important points that you think are relevant to the scenario and remember to
focus on issues that could affect your acceptance of a potential assurance
assignment.

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• Now read the following extract from the scenario and highlight the salient points –
remember to look out for any factors relevant to the ethical, professional, and other
issues described above.

Extract:

• World For Pets Co has been an audit client of TRUST & Co for the past three years.
The company owns and operates a chain of retail outlets selling pet supplies.

• The finance director of World For Pets Co recently communicated with your firm to
enquire about the provision of an assurance report on data provided in the
Environmental Report published on the company’s website.

• The following is an extract from the e-mail sent to your firm from the finance director of
World For Pets Co:

“At the last board meeting, my fellow directors discussed the content of the
Environmental Report. They are keen to ensure that the data contained in the report is
credible, and they have asked whether your firm would be willing to provide some kind of
opinion verifying the disclosures made. World For Pets Co is strongly committed to
disclosing environmental data, and information gathered from our website indicates that
our customers are very interested in environmental matters. It is therefore important to us
that World For Pets Co reports positive information which should help to retain existing
customers, and to attract new customers. I am keen to hear your views on this matter at
your earliest convenience. We would like verification of the data as soon as possible.”

• You have looked at World For Pets Co’s Environmental Report on the company
website, and found a great deal of numerical data provided, some of which is shown
below in Table 1.

Table 1: World For Pets Co's Environmental Report – numerical data

Environmental key
performance indicator
(KPI)/target
Actual KPI
year to
30 April 2022
Actual KPI year
to
30 April 2021
Reason for variance/trend
To spend $2m per annum
on developing
environmentally friendly
packaging and bags.
$2.2m spent
on relevant
development
$1.5m spent on
relevant
development
World For Pets Co has more
liquid funds available in the year
to 2022 to spend on
development projects.
To increase the amount of
waste recycled by 10% per
annum.
100 tonnes of
waste
recycled
50 tonnes of
waste recycled
World For Pets Co has doubled
the amount of waste recycled
due to installation of recycling
bins at all stores.
To ensure that at least 90%
of our customers are ‘very
happy’ with World For Pets
Co’s environmental policies.
95% ‘very
happy’
70% ‘very
happy’
Customers complete surveys in
store to rate our policies; data
shows that customers are
extremely happy with our
progress on environmental
matters.

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Stage 3 – take time to think about the requirement and the scenario

• You must take time and not rush to answer.

• When evaluating this particular scenario try to think widely about the information
provided.

• Your answer should cover a broad range of issues rather than concentrating on one
or two.

• Your comments must be tailored to the scenario.

• It is pointless, for example, to write about a general acceptance issue which is not
specifically related to World For Pets Co.

• It is important to appreciate that few marks will be available for stating the issue.

• The higher-level skill marks in this question will be awarded for a discussion of why
the issue is relevant to the decision about whether or not to provide the assurance
service to World For Pets Co.

The requirement is to evaluate the scenario and therefore it is crucial to demonstrate
an appreciation that there may be two conflicting sides to the discussion.

Table 2 below shows an example of a thought process, which identifies the issues and
explains why each issue is relevant to the requirement; the issues are shown in the order in
which they appear in the question.

Table 2: Example of a thought process which identifies issues and shows relevance
to the requirement

Issue from the
scenario
Why relevant to the requirement
Your firm is keen to
provide more
assurance services
due to loss of income
from audit services.
• The engagement will provide an extra source of revenue, and
accepting the assignment fits the commercial strategy of TRUST &
Co.
• But the firm should not put the fact that it wants more revenue
from providing assurance services above the more important
consideration of ethical and professional issues, and the overall
assessment of the risk attached to the assignment.
• It will also be important to consider whether the assignment is a
one-off engagement or is likely to be an ongoing service.
World For Pets Co
has been a client for
three years.
• Your firm will already possess good business understanding,
which will reduce the risk associated with the engagement, and
should also cut down on planning time.
• However, TRUST & Co must consider various ethical matters, as
World For Pets Co is already an audit client, including the
appropriateness of providing a non-audit service, and the impact
on the level of fees received from an existing client.
• It is irrelevant to discuss whether there are general threats, such
as financial interests in World For Pets Co, as TRUST & Co
already provides the audit service, and should therefore already
have conducted general ethical clearance.
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The assurance
service requested is
to provide an opinion
on environmental key
performance
indicators.
• This appears to be a very specialist assignment and it is
questionable whether a small firm of accountants would possess
relevant skills and experience.
• However, the firm could either spend time and money training staff
to perform the assignment or bring in specialists to perform the
work.
• This would enable TRUST & Co to build up experience in this
area, enabling it to provide further services of this type, which fits
in with the firm’s commercial strategy.
• However, whether the skills are developed in house, or bought in,
there will be considerable expense involved; TRUST & Co would
need to carefully consider the fee charged as the firm will want to
recover as much cost as possible.
World For Pets Co is
keen to disclose
positive data in order
to maintain customer
satisfaction.
• There is a high inherent risk attached to the environmental data.
• World For Pets Co has a clear reason to manipulate the data in
order to disclose that targets are being met.
• In deciding whether to accept the assignment, TRUST & Co must
consider whether this risk can be reduced to an acceptable level.
• It may be difficult for TRUST & Co to challenge the directors with
confidence about the data, given its lack of experience in this area.
World For Pets Co
requires a
‘verification’ of the
environmental data.
• The client appears to have an unrealistic expectation of what an
assurance service can provide.
• Before any decision is made about acceptance, TRUST & Co
must explain to the client that its report will not verify or certify the
data and is likely to provide at best ‘limited assurance’ over the
data – the expectation of the client clearly needs to be managed.
World For Pets Co
wants the work
performed as quickly
as possible.
• As discussed above, TRUST & Co will need to either develop or
buy-in expertise in this area, and due to the high inherent risk
identified above, the firm will want to spend plenty of time
gathering evidence.
• The client again may have unrealistic expectations about the
timeframe in which the opinion could be provided.
Some of the data
shown in the
environmental report
is not well defined.
• It would be relatively easy to gather evidence on the amount spent
on development, as this is similar to a substantive audit procedure,
but it may be hard for TRUST & Co to substantiate if the money
has really been spent on environmentally friendly packaging.
• Quantifying how much waste has been recycled will depend on the
strength of the system put in place by World For Pets Co to
capture the data.
• Equally, it would be difficult to gather detailed evidence to reach
an opinion on customer satisfaction as it is a very subjective
measure, not suitable for quantification.
• All of the above points suggest that the engagement will involve
testing some subjective issues, and possibly relying on the
controls put in place by the client, both of which have an impact on
the overall risk assessment of the work requested.

Table 2 is not an answer; it is a thought process. This is what you should be thinking
about after reading through the scenario. It may help to jot these ideas down in an answer
plan before making a start on your written answer, as this will help you to prioritise the points
and give the report a logical flow.

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Stage 4 – writing the report

The marks are not for the technical content of the answer, but for the way the relevant points
are communicated. Thus, the report will be evaluated on the following:

a) Use of a report format – a brief introduction, clear separate sections each
discussing a different point, and a final conclusion.

b) Style of writing – the report is addressed to the manager and so language should
be appropriate. You do not need to explain things that would be obvious to the
manager, and you must be tactful.

c) Clarity of explanation – make sure that each point is simply and precisely explained
and avoid ambiguity.

d) Evaluation skills – demonstrate that each point may have a positive and a negative
side.


Important Notes:

▪ Remember, when answering any question requirement, it is quality not quantity that
counts.

▪ You should make each point succinctly and remain focused on the specific
requirement.

▪ Questions can be length pressured, but it is important to remember that you should
be able to read the requirement, think about it, and write an answer in the word limit
available.

▪ This means that there is only a limited number of words available for actually writing
the answer, so keep it short and to the point.

▪ Irrelevant waffle earns no marks and will detract from the professional skills
evaluation.


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Outline report format

Introduction: 10 Marks

Report is internal, addressed to the manager, covering proposed assurance service for
existing audit client.

Section 1 – ethical matters 20 Marks (10 + 5 + 5)

✓ Provision of non-audit service
✓ Impact on total fee from client
✓ Competence to perform work – specialised engagement

Section 2 – risk-related matters 20 Marks (10 + 5 + 5)

✓ High inherent risk – figures prone to manipulation
✓ Data highly subjective
✓ Need to rely on systems put in place by client

Section 3 – commercial matters 20 Marks (5*4 marks each)

✓ Fee will have to be high enough to compensate for high risk
✓ Fee may need to compensate for specialists if used
✓ Strategic fit – assignment in line with commercial goals of TRUST & Co
✓ Build up experience in non-audit service
✓ Ascertain whether assignment will be recurring

Section 4 – other matters 10 Marks (5 + 5)

✓ Managing client expectation regarding type of opinion sought
✓ Managing client expectation regarding timeframe

Conclusion 10 Marks

✓ Summary of key issues and decision on acceptance

Report Presentation 10 Marks (5 * 2)

✓ Academic writing
✓ Language
✓ Formatting
✓ Referencing
✓ Logical structure