Explain the role and function of an audit committee.

Auditing 2016 Coursework
1/Explain the role and function of an audit committee (25 marks)
2/Management representations are a source of audit evidence. These representations may be oral or written, and may be obtained either on an informal or formal basis. The auditors will include information obtained in this manner in their audit working papers where it forms part of the total audit evidence.
Discuss the implications for the auditor of a small company, if the directors refuse to sign the letter of representation. (25 marks)
3/Dust&Rolls operates 32 food supermarkets. The companys year end is 31 December 2015. The audit manager and partner recently attended a planning meeting with the finance director and have provided you with the planning notes below.
You are the audit senior, and this is your first year on this audit. In order to familiarise yourself with Dust&Rolls, the audit manager has asked you to undertake some research in order to gain an understanding of Dust&Rolls , so that you are able to assist in the planning process. He has then asked that you identify relevant audit risks from the notes below and also consider how the team should respond to these risks. Dust&Rolls has spent 2.4 million in refurbishing all of its supermarkets; as part of this refurbishment programme their central warehouse has been extended and a smaller warehouse, which was only occasionally used, has been disposed of at a profit. In order to finance this refurbishment, a sum of 1.6 million was borrowed from the bank. This is due to be repaid over five years. The company will be performing a year-end inventory count at the central warehouse as well as at all 32 supermarkets on 31 December. Inventory is valued at selling price less an average profit margin as the finance director believes that this is a close approximation to cost. Prior to 2015, each of the supermarkets maintained their own financial records and submitted returns monthly to head office. During 2015 all accounting records have been centralised within head office. Therefore at the beginning of the year, each supermarkets opening balances were transferred into head offices accounting records. The increased workload at head office has led to some changes in the finance department and in November 2015 the financial controller left. His replacement will start in late December.
Required:
(a) List FIVE sources of information that would be of use in gaining an understanding of Dust&Rolls Stores Co, and for each source describe what you would expect to obtain. (10 marks)
(b) Using the information provided, describe FIVE audit risks and explain the auditors response to each risk in planning the audit of Dust&Rolls Stores Co. (25 marks)
(c) The finance director of Dust&Rolls Stores Co is considering establishing an internal audit department.
Describe the factors the finance director should consider before establishing an internal audit department. ( 15 marks)
(Total 50 marks)
Provide examples in the first 2 questions
Criterion 1
Addresses the question
The relevance of content in addressing the question (e.g. discuss, compare and contrast).

Criterion 2
Use of research and examples
The use of material, including course readings, research findings or other forms of evidence.

Criterion 3
Analysis and development of argument
The construction of a coherent and convincing argument for holding a particular view.

Criterion 4
Depth of knowledge and critical understanding
Depth of knowledge of relevant literature and ability to use complex concepts and ideas.

Criterion 5
Originality
Provision of new insights or original ideas based on independent thought or creative thinking.

Criterion 6
Structure
A logical arrangement of the work into sections (introduction, main points, conclusion) with appropriate paragraphs, linking and signposting.

Criterion 7
Presentation
Putting across ideas clearly, succinctly and without grammatical and spelling errors.

Criterion 8
Referencing and bibliography
Acknowledgement of sources using appropriate citation conventions e.g. Harvard Business standards.

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