DUE DATE: 2nd
SEMESTER SPRING 2013
FUNDAMENTALS OF AUDITING –ACC 311
ASSIGNMENT NO. 01
MAY 2013 MARKS: 20
Learning objectives:
The students are expected to learn ethics to be observed by an auditor in his profession.
Assignment:
Nabi Buksh Chartered Accountants (NBCA) is a large audit firm having specialization in the audit of large specialized retailers. NBCA has been working as auditor of Multi Food Company (MFC) - a large fast food chain store for the last five years. Recently, MFC’s main competitor - Hot Food Company (HFC) has also approached NBCA to act as their auditors. Both the companies are highly competitive and upon sensing this deal, MFC is keenly concerned about its business secrets which are likely to leak.
This year MFC’s internal audit department is overly stressed due to lack of employees and this department is unable to cop it. Therefore, MFC management is considering either to hire more employees or outsource the functionality of this department. Hiring option requires extensive training of new recruits but the year closing is on, whereas, the outsourcing requires experts to visit regularly to test controls both at the outlets and head office. In this regard, MFC is considering NBCA for outsourcing its internal audit functions while letting NBCA to remain its external auditors. The managing director of MFC has just recruited his eldest son – Mr. Big as the company’s purchase manager. He would receive company’s shares in place of monetary salary as his compensation. Mr. Big has suggested to his father – the Company’s MD to appoint NBCA as internal auditors on the condition that their remuneration will be equal to 5% of the company’s yearly profits. He is of the view that this deal would certainly align the interests of NBCA and MFC.
Required:
1. How NBCA can assure MFC over up-keeping of its business secrets? (4 marks)
2. What are the pros and cons of outsourcing for MFC of its internal audit functions? (5 marks)
3. Is it appropriate for NBCA to work as internal auditor of MFC? Why and why not? (5 marks)
4. Should NBCA accept Mr. Big’s offer. Why and why not? (6 marks)
Note: For answering the above questions, you need to read “Code of Ethics for Chartered Accountants”
issued by Institute of Chartered Accountants of Pakistan. You can download this document at:
http://www.icap.org.pk/userfiles/file/TechnicalDepart/Expo_clean_fi...
IMPORTANT:
24 hours extra / grace period after the due date are usually available to overcome uploading difficulties. This
extra time should only be used to meet the emergencies and above mentioned due dates should always be
treated as final to avoid any inconvenience.
OTHER IMPORTANT INSTRUCTIONS:
DEADLINE:
• Make sure to upload the solution file before the due date on VULMS.
• Any submission made via email after the due date will not be accepted.
FORMATTING GUIDELINES:
• Use the font style “Times New Roman” or “Arial” and font size “12”.
• It is advised to compose your document in MS-Word format.
• You may also compose your assignment in Open Office format.
• Use black and blue font colors only.
REFERENCING GUIDELINES:
• Use APA style for referencing and citation. For guidance search “APA reference style” in Google and
read various website containing information for better understanding or visit
http://linguistics.byu.edu/faculty/henrichsenl/apa/APA01.html
RULES FOR MARKING
Please note that your assignment will not be graded or graded as Zero (0), if:
• It is submitted after the due date.
• The file you uploaded does not open or is corrupt.
• It is in any format other than MS-Word or Open Office; e.g. PowerPoint, PDF etc.
• It is cheated or copied from other students, internet, books, journals etc.
Note related to load shedding: Please be proactive
Dear students!
As you know that Pre Mid-Term semester activities have been started and load shedding problem is also prevailing in our country now a days. Keeping in view the fact, you all are advised to post your activities as early as possible without waiting for the due date. For your convenience; activity schedule has already been uploaded on VULMS for the current semester, therefore no excuse will be entertained after due date of assignments, quizzes or GDBs.
SEMESTER SPRING 2013
FUNDAMENTALS OF AUDITING –ACC 311
ASSIGNMENT NO. 01
MAY 2013 MARKS: 20
Learning objectives:
The students are expected to learn ethics to be observed by an auditor in his profession.
Assignment:
Nabi Buksh Chartered Accountants (NBCA) is a large audit firm having specialization in the audit of large specialized retailers. NBCA has been working as auditor of Multi Food Company (MFC) - a large fast food chain store for the last five years. Recently, MFC’s main competitor - Hot Food Company (HFC) has also approached NBCA to act as their auditors. Both the companies are highly competitive and upon sensing this deal, MFC is keenly concerned about its business secrets which are likely to leak.
This year MFC’s internal audit department is overly stressed due to lack of employees and this department is unable to cop it. Therefore, MFC management is considering either to hire more employees or outsource the functionality of this department. Hiring option requires extensive training of new recruits but the year closing is on, whereas, the outsourcing requires experts to visit regularly to test controls both at the outlets and head office. In this regard, MFC is considering NBCA for outsourcing its internal audit functions while letting NBCA to remain its external auditors. The managing director of MFC has just recruited his eldest son – Mr. Big as the company’s purchase manager. He would receive company’s shares in place of monetary salary as his compensation. Mr. Big has suggested to his father – the Company’s MD to appoint NBCA as internal auditors on the condition that their remuneration will be equal to 5% of the company’s yearly profits. He is of the view that this deal would certainly align the interests of NBCA and MFC.
Required:
1. How NBCA can assure MFC over up-keeping of its business secrets? (4 marks)
2. What are the pros and cons of outsourcing for MFC of its internal audit functions? (5 marks)
3. Is it appropriate for NBCA to work as internal auditor of MFC? Why and why not? (5 marks)
4. Should NBCA accept Mr. Big’s offer. Why and why not? (6 marks)
Note: For answering the above questions, you need to read “Code of Ethics for Chartered Accountants”
issued by Institute of Chartered Accountants of Pakistan. You can download this document at:
http://www.icap.org.pk/userfiles/file/TechnicalDepart/Expo_clean_fi...
IMPORTANT:
24 hours extra / grace period after the due date are usually available to overcome uploading difficulties. This
extra time should only be used to meet the emergencies and above mentioned due dates should always be
treated as final to avoid any inconvenience.
OTHER IMPORTANT INSTRUCTIONS:
DEADLINE:
• Make sure to upload the solution file before the due date on VULMS.
• Any submission made via email after the due date will not be accepted.
FORMATTING GUIDELINES:
• Use the font style “Times New Roman” or “Arial” and font size “12”.
• It is advised to compose your document in MS-Word format.
• You may also compose your assignment in Open Office format.
• Use black and blue font colors only.
REFERENCING GUIDELINES:
• Use APA style for referencing and citation. For guidance search “APA reference style” in Google and
read various website containing information for better understanding or visit
http://linguistics.byu.edu/faculty/henrichsenl/apa/APA01.html
RULES FOR MARKING
Please note that your assignment will not be graded or graded as Zero (0), if:
• It is submitted after the due date.
• The file you uploaded does not open or is corrupt.
• It is in any format other than MS-Word or Open Office; e.g. PowerPoint, PDF etc.
• It is cheated or copied from other students, internet, books, journals etc.
Note related to load shedding: Please be proactive
Dear students!
As you know that Pre Mid-Term semester activities have been started and load shedding problem is also prevailing in our country now a days. Keeping in view the fact, you all are advised to post your activities as early as possible without waiting for the due date. For your convenience; activity schedule has already been uploaded on VULMS for the current semester, therefore no excuse will be entertained after due date of assignments, quizzes or GDBs.
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