Q.5 a) Shakeel Foods Limited (SFL) manufactures a variety of food products.

The incharge of the audit team

at SFL has requested you to advise on the following issue, during an informal discussion with a
company’s employee, he came to know that SFL is in litigation with one of its competitors. However, the
said case was not included in the list of cases provided by SFL nor was it mentioned by the legal advisor
in his confirmation. On being confronted, the management has informed that they are in the negotiation
phase with the competitor and intend to settle the dispute through payment of Rs. 150 million.
Discuss how the auditor should deal with the above situations. (8)
b) You are a partner in a firm of chartered accountants, looking after the audit and advisory services
department. One of your clients has approached you for services in relation to certification of
compliance with a specific control framework, with regard to their production process.
Required: What are the different types of reports that you can offer to the client, clearly specifying
the key characteristics of each form of report. (6)
Q.6 a) There are multiple uncertainties which impact the ability of Link Telecom Limited to operate as a
going concern. An important assumption in the working provided by the client is the continuous financial
support from the parent company. The team in-charge wants guidance as to how the validity of this
assumption can be evaluated.
Guide audit senior in this regard (7)
b) The directors' report of Abrupt Co states that investment property rental forms a major part of
revenue. However, a note to the financial statements shows that property rental represents only 1.6%
of total revenue for the year. The audit senior is satisfied that the revenue figures are correct. The
audit senior has noted that an unmodified opinion should be given as the audit opinion does not
extend to the directors' report.
Comment on the decision of Audit senior (5)
c) Your firm is performing an engagement to examine and provide assurance on Lake’s cash flow
forecast for the three years ending 30 September 2021. The forecast has been prepared by Lake’s
directors in support of a loan application. Lake’s bank requires the forecast to be examined and
reported on by independent accountants. The cash flow forecast has been prepared on the assumption
that revenue will grow by 8% pa. Your firm believes this is highly unrealistic because current revenue
growth for Lake and the industry in which it operates is 2% pa and 3% pa respectively.
Required: state, with reasons, the implications for your firm’s assurance reports. (5)
d) Differentiate between money laundering and terrorism financing, further your firm has been
categories in providing specified services related to AML regulations, please specify the obligations
of reporting firm under laws and regulations as applicable in Pakistan. (6)

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