Meeting Notes: Mighty Mining Ltd
Attendees: Bruce Mackenzie (Audit Engagement Manager), Isabella Woods, Thomas Moore (Audit partner from BMS) and Mighty Mining Ltd Senior Management
Date: 30th July, 2018
Staffing:
• Operational staff in mines are fly-in, fly-out living on site with a small centralised full-time staff in Head Office in Brisbane
• Entrepreneurial Board of Directors– no changes in last 12 months – Paul Barclay is Deputy Chair
• High turnover of accounting staff which has meant that purchasing processing and Accounts Payable transactions completed by the same staff including ordering, input, matching and approvals. Mine managers are responsible for the initial request and CFO’s staff have key responsibilities for each of the mines including visiting on a regular basis.
Plant & Equipment:
• Property, Plant &Equipment (PP&E) is serviced at the site and a very limited amount of supplies are held on hand these are usually purchased as required
• No stores inventory is in the Trial Balance as the PPE supplies are expensed as they are purchased.
• Annual PP&E stocktakes are part of the role of the accounting staff when they visit each site. Usually two staff visit all 5 locations for one week each quarter.
• Audit staff have never observed stocktakes for machinery (PP&E).
General:
• Directors believe the PP&E assets are undervalued and have suggested that BMS could complete the revaluation because of Paul’s knowledge of the company and the sector.
• Bank reconciliations are being completed each quarter – to align with board meetings (and because of staffing issues)
• Purchases of goods and services are ordered and delivered to each mine. Mine managers raise all purchase orders independently of Head Office although when accounting staff visit, they usually make sure that all delivery dockets (ready for collection) have approved purchase orders (by the mine manager) and take them back to the Accounts Payable section at Head Office.
• The ATO visited for a desk audit for monthly BAS and income tax returns. A number of issues were raised in relation to exploration and related claims but to date, no assessment has been issued. The company’s tax advisors are presently following up the matters. The BMS Tax partner (Mark Stafford) is the tax advisor.
• With changes in operation and view to have an IPO, tax fees have increased. CFO commented that now both audit and tax using same firm, can a deal on fees be struck?
• The Accounts Receivable Supervisor has requested that debtor’s confirmations are not sent out by the auditors this year, as last year there were some adverse comments from some of the overseas debtors. The response rate of debtors last year was 60% return.
• MML is exploring a new site in PNG. The new site in PNG has found some significant deposits requiring extra costs and possible increase in loans in future years. The local council in PNG is seeking possible royalties from the new mine as a local government tax for use of a cultural site. MML has been discussing this with their lawyers.
QUT Business School – School of Accountancy
AYB301 Audit and Assurance
SEMESTER TWO 2018
Group Project
(Weighting Total – 30%)
Due Thursday 20 September at 11.59pm
Group Formation Form a group of 3 with other students in the unit and register your group in Blackboard under Assessment>Assessment Item 2: Group Project.
Working in a group You will now work with that group for the assessment task. You can use the email in this group area to communicate with group members and also save and share files between the group.
Group Task Complete the Audit Current File for Mighty Mining Ltd (excel file provided)
Submit the completed file online at the Group Project Submission link at Assessment>Assessment Item 2: Group Project in AYB301 Blackboard site.
• Only one group member needs to submit on behalf of the group.
• Blackboard will automatically link all group members to this submission
• All marks and feedback will be provided electronically via Blackboard back to all group members.
Individual Task Each Student in the unit must also undertake a group project peer evaluation survey at Assessment>Assessment Item 2: Group Project by the due date and time. This will provide feedback on the group processes and comments must be included in the survey.
Weighting Submission of completed Audit Working Papers for Mighty Mining Ltd (25%)
Individual Group Assessment Survey (5%)
Grading will be based upon the text that is within the word limit (or 10% above)
Length Excel Audit Current File Mighty Mining – Word Limit (2000 words +10% maximum)
Note: The analytical review worksheet and the Trial Balance worksheet are not counted as part of the submission word count.
Electronic survey process via Blackboard (word limit does not apply)
This assessment item assesses the following learning outcomes and AoL goals:
PC3.1 Professionally communicate accounting and legal knowledge, advice and recommendations in written forms to both accountants and non-accountants.
HO2.1 Investigate real world business issues and situations through the effective analysis, evaluation and synthesis of theory and practice
TS4.2 Apply teamwork knowledge and skills to work effectively with others across diverse accounting purposes and contexts.
SE5.1 Demonstrate and apply knowledge of ethical and regulatory perspectives relating to professional accounting.
Late Assessment and Extensions
As the group project is an assessment that involves a group of three students and the group has a number of weeks to complete the assessment task, students will be unable to apply for an extension via the QUT Late Assessment Policy. Further information on late assignments and extensions can be found at https://www.student.qut.edu.au/studying/assessment/extension. The MOPP Policy relating to Late Assessment and Extensions can be found here: https://monkessays.com/write-my-essay/mopp.qut.edu.au/E/E_06_08.jsp
BARCLAY, MOORE & STAFFORD – CHARTERED ACCOUNTANTS
Bruce Mackenzie is a Chartered Accountant (CA) and Senior Audit Manager of Barclay, Moore & Stafford (BMS) – a well-known accounting and assurance firm with its head office in Brisbane’s central business district (CBD). BMS provides a cross-section of services to its clients including auditing, taxation, business valuations and management consultancy services. The firm has six partners – two in audit (Barclay and Moore), two in tax (Stafford and O’Hoare) and two in business and consulting services. The two audit partners are registered company auditors under the Corporations Law and ASX requirements. Bruce Mackenzie commenced his career in a smaller suburban audit firm when he graduated in 2010, transferring to BMS on promotion (as Audit Manager) in 2017 with a goal to become a partner of the firm within the next 5 years. He is hard working, focussed and prides himself on maintaining up to date technical auditing and accounting skills which is beneficial to his role/s at BMS.
Bruce has recently been asked to be the Audit Engagement Manager for a potential new audit for the year ended 30 June 2018 – Mighty Mining Ltd (MML), a mining company with five Queensland mine sites. Thomas Moore is the planned audit engagement partner for MML if the engagement is accepted by BMS. Thomas will not be directly involved in the audit as he will be away from the office for next two months but will back to sign the audit report for MML based on the work undertaken by Bruce. Working with Bruce on the audit will be Isabella Woods (senior auditor) and Hudson Fielding who has recently been promoted to graduate auditor now he has finished his undergraduate degree in accounting. Hudson has been working with BMS as an undergraduate for the last 3 years and has been assigned to the same audit team during that time. He has been and will continue to be supervised by Isabella (who has been working with mining clients for the last 4 years starting as a graduate).
AUDIT PERMANENT FILE INFORMATION
Potential Client – Mighty Mining Ltd (MML)
MML are a mining company with origins in Queensland and recent exploration in Papua New Guinea (PNG). There are 5 mine sites throughout Queensland, but all business activity is centralised in the Head Office in Brisbane. The CFO (Mike Barclay) and his team regularly visit mine locations. The company believes that the exploration in PNG will be the catalyst for them to prepare an Initial Public Offering (IPO) to list on the ASX. Currently the MML Board of Directors (Board) includes Paul Barclay (one of the Audit Partners of BMS and Mike’s brother) as Deputy Chair.
With the possible move to the ASX, the audit firm who has undertaken the MML audits for the last 8 years has given notice of resignation as MML auditors due to their Audit Manager being offered a senior operational position (Corporate Secretary) at MML and the Audit Engagement Partner retiring. The firm was a small firm and their client list is being sold to another small audit firm. The CFO for MML has suggested that the audit should be finished by the end of August so that the company can get organised to prepare for the IPO. A few firms who offer audit services in Brisbane have been reviewed by MML as potential new auditors but BMS has been recommended by the MML Board to be appointed as auditors for the firm for the next 3 years.
Staff from BMS and MML meet to discuss the audit (see the attached client meeting notes as a record of the initial meeting). Bruce knows that from the meeting requests and his initial planning preparation, this audit will not be able to be completed before the end of September. The CFO of MML (Mike Barclay) has also commented that he has doubts about the ability of his staff to complete the general-purpose financial statements (in full compliance with accounting standards) required for the IPO process and requests that BMS assist with the preparation of these statements
AUDIT CURRENT FILE -MIGHTY MINING LTD
AUDIT TASKS:
1. ACCEPTANCE DECISION – AUDIT OF MIGHTY MINING LTD 2018 (10%)
Assess whether it is ethical for BMS to accept the audit engagement of MML for 2018. Refer to APES110 (2017 version) and determine the implications and make appropriate under recommendations in relation to the audit acceptance decision for BMS in the Audit Current File – MML provided on Blackboard assessment>Group Project. The two workpapers to complete for this task are:
AE1 – Engagement Issues (Review) Workpaper to report your findings to the BMS partners
AE1.1- Engagement Ethical Issues Worksheet critically analysing the key ethical issues and making recommendations for resolution
2. PLANNING THE AUDIT OF MIGHTY MINING LTD 2018 (15%)
Based on the implementation of your group’s analysis and ethical recommendations, BMS agree to accept the audit of the financial statements as at 30 June 2018. Bruce (Audit Engagement Manager) starts planning the audit by completing a detailed analysis of the final MML trial balance, performing an initial analytical review, and preparing for the team planning meeting.
Your project group has been assigned to work with Bruce’s audit team. Bruce, together with Isabella, Hudson and your group (3 new graduates) are about to start work on the audit of MML for the year ending 30 June 2018. This is a new audit for this firm, however, the previous firm has provided their workpapers and have issued an unmodified opinion for each year. The new Corporate Secretary of MML is the previous audit senior of BMS now working at MML.
Bruce, Isabella and the Audit Engagement Partner Thomas Moore have had an initial meeting with the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of MML and have provided the audit team with the following information from their meeting:
Mighty Mining Ltd Comparative Trial Balance
Meeting notes taken at discussions with Mighty Mining Ltd Senior Management
The Audit Engagement Manager has invited the entire audit team to a planning brainstorming meeting in two weeks to discuss:
The potential audit risk areas for the audit engagement for 2018
Determining an agreed overall audit materiality assessment
As you are new graduates, Bruce has asked you all to work together as a group to prepare for this meeting which is the first planning meeting for the new audit of MML and the first planning meeting your group has attended. Bruce has asked the group to complete the following work papers in order to prepare for the meeting. The workpapers form part of the Audit Current File for MML on blackboard which you have already partially completed in determining whether to accept the audit of MML.
AP2.2 -Trial Balance Worksheet
• This is a supporting worksheet that provides details of all trial balance accounts for Mighty Mining Ltd and shows the estimated June 2018 balances (based on March 2018 actuals) and the full year audited account balances for 30th June 2017. You will need to complete the trend analysis columns in this worksheet and interpret the variance and percentage movement information and the impact on the audit plan of each account balance. This worksheet will assist your group to complete the analytical review work paper.
AP2.1- Analytical Review Worksheet
• This is a supporting worksheet for the Analytical Review Work paper. It has been set up to assist the group to calculate ratios for 2017 and compare with calculations of the same ratios for the estimated full year 2018. The group will need to use the Trial Balance figures to calculate the ratios and you are expected to use Excel formulae to automatically link between the Trial Balance worksheet and the Analytical review worksheet. This worksheet will assist your group to complete the Analytical Review Work paper.
AP2- Analytical Review Work Paper
• This work paper will document the findings from the analytical review worksheet and the trends identified in the Trial Balance Worksheet. Each group will need to bring forward the key concerns from their worksheet analyses to be summarised in this work paper.
AP1 – Planning Meeting Work Paper
• This work paper should include the key findings of your group’s brainstorming from all the information provided and the completed work paper/ worksheets. The focus of this workpaper is to identify the key impacts on the audit plan for Mighty Mining Ltd with sufficient detail for your group to present and discuss at the audit planning team meeting. The group will need to consider the client meeting notes, your analytical review findings, the trend analyses and also consider materiality as part of this work paper
3. PEER EVALUATION OF GROUP PROCESSES – SURVEY (5%)
Each Student in the unit must individually complete the Group Project Peer Evaluation Survey under Assessment>Assessment Item 2: Group Project in the AYB301 Blackboard Site.
This online assessment is a required element of the group project assessment task and is summative in nature (worth 5%). You will be required to answer a series of questions about how individual members of your group managed the group project process.
QUT Business School – School of Accountancy
AYB301 Audit and Assurance- Semester 2, 2018
Assessment 2: Group Project (30%) Criteria Sheet Group Number_____________
Student Name: _____________________________________________________ Student No: _____________________________________________________
Student Name: _____________________________________________________ Student No: _____________________________________________________
Student Name: _____________________________________________________ Student No: _____________________________________________________
Grade 7 6 5 4 <4 %
Ethical and Legal Understanding (SE5.1)
Ability to identify ethical issues and apply ethical reasoning and codes of practice to a number of scenarios. Ethical issues are correctly identified. Comprehensive and well-judged application of ethical reasoning and ethical codes of practice to the facts of each scenario, and in support of each recommendation. Exemplary use of the ethical analysis.
Ethical issues are correctly identified. Effective application of ethical reasoning and ethical codes of practice to the facts of each scenario and in support of each recommendation. The ethical analysis was well executed.
Most ethical issues are correctly identified. A reasonable application of ethical reasoning and ethical codes of practice to the facts of each scenario and in support of each recommendation. The ethical analysis was adequately used.
Some ethical issues are correctly identified. Some application of ethical reasoning and ethical codes of practice, to support the decision about ethical dilemmas. Some attempt to use this to support each recommendation. Some attempt to use an ethical analysis. Little application of ethical reasoning and ethical codes of practice, to support the decision about an ethical dilemma.
/5
Higher Order Thinking (HO2.1)
Effective analysis and evaluation is applied to present logical arguments with respect to alternative actions and consequences. Impacts on audit planning are detailed.
The work papers provide evidence that rigorous critical analysis has been applied to the scenario to explain the impact of ethics on the audit engagement acceptance, and the impact of analytical review, trend analysis and other evidence on audit planning. The work papers are presented in a logical, concise and compelling way.
The work papers provide evidence of strong critical analysis being applied to the scenario to explain the impact of ethics on the audit engagement acceptance and the impact of analytical review, trend analysis and other evidence on audit planning. The work papers are presented in a logical way. The work papers provide evidence of critical analysis being applied to the scenario to explain the impact of ethics on the audit engagement acceptance and the impact of analytical review, trend analysis and other evidence on audit planning. The work papers are presented in a mostly logical way. The work papers provide evidence of some critical analysis being applied to the scenario to explain the impact of ethics on the audit engagement acceptance and, the impact of analytical review, trend analysis and other evidence on audit planning. The work papers are presented in a reasonable manner but detail is lacking. The work papers provide evidence that little or no critical analysis has been being applied to the scenario to explain the impact of ethics on the audit engagement acceptance and, the impact of analytical review, trend analysis and other evidence on audit planning. There was little or no presentation evident in the work papers. /10
Professional Communication (PC3.1)
All written communication is clear and concise. Correct spelling, punctuation, grammar and referencing throughout. Response to the task including preparation of work papers is comprehensive and concise. Written in a clear, logical and structured manner with correct spelling, punctuation, grammar and referencing throughout.
Response to task including preparation of work papers is comprehensive. Written in a clear, logical and structured manner with mostly correct spelling, punctuation, grammar and referencing.
Response to task including preparation of work papers is adequate. Written in a reasonably clear, logical and structured manner with some spelling, punctuation, grammar and referencing mistakes. Response to task including preparation of work papers is adequate. Writing lacks clarity and structure with several spelling, punctuation, grammar and referencing mistakes. Response to task including preparation of work papers was unclear, illogical and unstructured with unsatisfactory spelling, punctuation, grammar and acknowledgement of sources. /10
TOTAL REPORT MARK /25
PART C – TEAM WORK ASSESSMENT
Team Work (TS4.2)
Showed insight into group processes and practices. Acted flexibly and appropriately within the team. Able to influence group dynamic in positive ways to achieve a final outcome. Assessed by Peer Evaluation Survey Acted flexibly and appropriately throughout the process, in concert with other group members; contribution showed insight into group factors and processes and ability to influence group dynamic in positive ways to achieve final output. Provided well-considered, insightful and constructive reflections on team and own performance with respect to future improvements. Acted flexibly and appropriately throughout the process, in concert with other group members; contribution showed some insight into group factors and processes, and some evidence of influencing group dynamic in positive ways to achieve final output. Provided well-considered, constructive reflections on team and own performance with respect to future improvements. Most activity was appropriate in interactions with other group members.
Contribution was generally positive in terms of group factors and processes, and achievement of final output.
Provided some useful reflections on team and own performance with respect to future improvements. A basic level of appropriateness was evident in interactions with other group members. Some positive contribution was made to group factors and processes, and to achievement of final output. Some attempt was made to provide reflections on team and own performance but these lacked depth or were not constructive. Inappropriate or no interactions with other group members; inappropriate or no contribution to group factors and processes or to achievement of final output. Little or no attempt was made to reflect on team and own performance with respect to future improvements. /5
