2019-01-25T11:35:09+00:00 Assignments

Outline the main contents of an auditor’s report

This paper concentrates on the primary theme of Outline the main contents of an auditor’s report in which you have to explain and evaluate its intricate aspects in detail. In addition to this, this paper has been reviewed and purchased by most of the students hence; it has been rated 4.8 points on the scale of 5 points. Besides, the price of this paper starts from £ 40. For more details and full access to the paper, please refer to the site.

AUDITING & TAXATION

Instructions to candidates:

a) Time allowed: Three hours (plus an extra ten minutes’ reading time at the start – do not write anything during this time)

b) Answer ALL of Part A, any THREE questions from Part B and any TWO questions from Part C

c) Part A carries 10% of the marks, Part B carries 60% of the marks and Part C carries 30% of the marks.

Marks for each question are shown in [ ]

d) Non-programmable calculators are permitted in this examination

PART A

1. Outline the main contents of an auditor’s report. [10]

PART B

2. a) Explain the rights and duties of an auditor. [10]

b) Explain the term audit sampling. [10]

3. Explain briefly how you would verify the following items:

a) Share capital and reserves

b) Bank balances

c) Vehicles

d) Trade payables (trade creditors) [5 each]

4. a) Explain the principal reasons for the collection and production of audit working papers. [10]

b) Discuss the effect of subsequent events (post balance sheet events) on the financial statements and on the auditor’s report. [10]

5. Explain the following terms:

a) Letter of engagement

b) Internal control

c) Inherent risk

d) Corporate governance [5 each]

PART C

6. Write short notes on THREE of the following:

a) PAYE

b) Personal allowances

c) Capital gains tax (CGT)

d) Tax evasion [5 each]

                                                                                                                                                         Continued overleaf

7. The following information applies to any personal tax calculations:

TAX RATES

20% on the first £30,000 of taxable income

40% on the next £70,000 of taxable income

50% on any further taxable income

PERSONAL ALLOWANCES

Single person £9,000

Additional allowance of £5,000 can be claimed by one of the partners in a marriage

PENSION CONTRIBUTIONS

Up to the age of 49 a maximum of 15% of gross pay can be paid tax free into a qualifying pension fund

From age 50 a maximum of 20% can be paid in

Lyra, aged 46, is a single person who earns £320,000 per year. Lyra has paid 10% of her gross pay into a qualifying pension fund. Lyra has paid £510 in respect of professional subscriptions. Lyra has also paid £2,100 in respect of expenses which are allowable against tax.

Hamid, aged 56, is married (and claims the additional allowance) and earns £130,000. Hamid has paid

20% of his gross pay into a qualifying pension.

TASKS

Calculate the taxable pay and the total tax payable for EACH of the following:

a) Lyra [9]

b) Hamid [6]

8. The following is the summarised internal profit and loss account of UGO Ltd after its first year of trading:

£

Sales 1,600,000

Cost of sales (800,000)

Distribution costs (300,000)

Administration expenses (180,000)

Depreciation of equipment (25,000) *

Depreciation of IT equipment (45,000) *

*Already included in either distribution costs or administration expenses above.

Other information:

Original cost of equipment 150,000

Original cost of IT equipment 160,000

Corporation tax (i.e. company taxation) is charged at 20% of the taxable profit.

Initial writing down allowances are:

25% as regards equipment

50% as regards IT equipment

Included in the distribution costs is £22,000 which is deemed non-allowable.

TASK

Calculate UGO Ltd’s total taxable profit AND the total tax charge for the year. [15]


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