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Please  use  the  grid  provided  on  page  two  of  the  Candidate  Answer  Booklet  to  record  your  answers  to  each  multiple choice question. Do not write out the answers to the MCQs on the lined pages of the answer booklet.

 

Each question is worth 2 marks.

 

The following scenario relates to questions 1–5

 

You are an audit manager of Buffon & Co, and you have just been assigned the audit of Maldini Co (Maldini). The audit engagement  partner  who  is  responsible  for  the  audit  of  Maldini,  a  listed  company,  has  been  in  place  for  approximately eight years and her son has just been offered a role with Maldini as a sales manager. This role would entitle him to shares in Maldini as part of his remuneration package.

 

Maldini’s  board  of  directors  is  considering  establishing  an  internal  audit  function,  and  the  finance  director  has  asked Buffon & Co about the differences in the role of internal audit and external audit. If the internal audit function is established, the directors have suggested that they may wish to outsource this to Buffon & Co.

 

The finance director has suggested to the board that if Buffon & Co is appointed as internal as well as external auditors, then fees should be renegotiated with at least 20% of all internal and external audit fees being based on the profit after tax of the company as this will align the interests of Buffon & Co and Maldini.