【正确答案】Reliance on the work of an independent valuer ISA 500 Audit Evidence requires auditors to evaluate the competence, capabilities including expertise and objectivity of a management expert. This would include consideration of the qualifications of the valuer and assessment of whether they were members of any professional body or industry association. The expert’s independence should be ascertained, with potential threats such as undue reliance on Jackdaw or a self-interest threat such as share ownership considered. In addition, Puffin & Co should meet with the expert and discuss with them their relevant expertise, in particular whether they have valued similar land and buildings to those of Jackdaw Motor Cars Co (Jackdaw) in the past. Puffin & Co should also consider whether the valuer understands the accounting requirements of IAS 16 Property, Plant and Equipment in relation to valuations. The valuation should then be evaluated. The assumptions used should be carefully reviewed and compared to previous revaluations at Jackdaw. These assumptions should be discussed with both management and the valuer to understand the basis of any valuations.

【正确答案】Substantive procedures for land and buildings – Obtain a schedule of land and buildings revalued this year and cast to confirm completeness and accuracy of the revaluation adjustment. – On a sample basis agree the revalued amounts to the valuation statement provided by the valuer. – Agree the revalued amounts for these assets are included correctly in the non-current assets register. – Recalculate the total revaluation adjustment and agree correctly recorded in the revaluation surplus. – Agree the initial cost for the warehouse addition to supporting documentation such as invoices to confirm cost. – Confirm through a review of the title deeds that the warehouse is owned by Jackdaw. – Recalculate the depreciation charge for the year to ensure that for assets revalued during the year, the depreciation was based on the correct valuation and for the warehouse addition that the charge was for nine months only. – Review the financial statements disclosures of the revaluation to ensure they comply with IAS 16 Property, Plant and Equipment. (ii) Substantive procedures for work in progress (WIP) – Prior to attending the inventory count, discuss with management how the percentage completions are attributed to the WIP, for example, is this based on motor cars passing certain points in the production process. – During the count, observe the procedures carried out by Jackdaw staff in assessing the level of WIP and consider the reasonableness of the assumptions used. – Agree for a sample that the percentage completions assessed during the count are in accordance with Jackdaw’s policies communicated prior to the count. – Discuss with management the basis of the standard costs applied to the percentage completion of WIP, and how often these are reviewed and updated. – Review the level of variances between standard and actual costs and discuss with management how these are treated. – Obtain a breakdown of the standard costs and agree a sample of these costs to actual invoices or payroll records to assess their reasonableness. – Cast the schedule of total WIP and agree to the trial balance and financial statements. – Agree sample of WIP assessed during the count to the WIP schedule, agree percentage completion is correct and recalculate the inventory valuation.

【正确答案】Audit report Discuss with the management of Jackdaw why they are refusing to make the amendment to WIP Assess the materiality of the error; if immaterial, it should be added to the schedule of unadjusted differences. The auditor should then assess whether this error results in the total of unadjusted differences becoming material; if so, this should be discussed with management; if not, there would be no impact on the audit report. If the error is material and management refuses to amend the financial statements, then the audit report will need to be modified. It is unlikely that any error would be pervasive as although WIP in total is material, it would not have a pervasive effect on the financial statements as a whole. As management has not complied with IAS 2 Inventory and if the error is material but not pervasive, then a qualified opinion would be necessary A basis for qualified opinion paragraph would need to be included before the opinion paragraph. This would explain the material misstatement in relation to the valuation of WIP and the effect on the financial statements. The opinion paragraph would be qualified ‘except for’