The options available to Johnson, Odewole, Thomas & Co. include:

1. Requesting an independent review of the disputed audit areas by a third party to provide an objective assessment.
2. Seeking further discussions with APS to reach a consensus on the disputed matters.
3. Issuing a qualified opinion or an emphasis of matter if the concerns are not adequately addressed.
4. Withdrawing from the audit engagement if the differences are irreconcilable and if they believe the integrity of the audit is compromised.
5. Documenting all disagreements and the reasons for their position in the audit working papers, to ensure transparency and compliance with audit standards.

c. Discuss the points on which the Chairman needs to base his decision, according to standard acquisition procedures. (7 Marks)

Answer: The Chairman needs to base his decision on the following points:

1. Due Diligence: Whether proper due diligence was conducted before the acquisition, including valuation and assessment of risks.
2. Compliance with Capital Expenditure Policies: Whether the acquisition exceeded the approved capital expenditure limits and whether proper approvals were obtained.
3. Valuation of the Property: Whether the value paid for the property was in line with market value and supported by independent valuation.
4. Conflict of Interest: Whether there was any conflict of interest in acquiring the property from a former staff member.
5. Internal Controls: Whether the company’s internal controls for capital expenditure and property acquisition were followed.
6. Financial Impact: The financial impact of the acquisition on the company’s financial statements and whether it aligns with the company’s strategic goals.
7. Legal and Regulatory Compliance: Whether the acquisition complied with relevant legal and regulatory requirements.

Based on these points, the Chairman should gather sufficient information to make an informed decision regarding the appropriateness of the acquisition.

d. If the Chairman agrees with the position of Johnson, Odewole, Thomas & Co., determine the reporting requirement and draft an appropriate report for inclusion in the auditors’ report. (6 Marks)

Answer: If the Chairman agrees with the position of Johnson, Odewole, Thomas & Co., the auditors may need to include a qualified opinion or an emphasis of matter paragraph in their report. The report should highlight the concerns regarding the acquisition process and its potential impact on the financial statements.

Draft Report:

Qualified Opinion

We have audited the financial statements of Mandarin Manufacturing Plc for the year ended 30 September, 2020. In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion section, the financial statements present fairly, in all material respects, the financial position of the company as at 30 September, 2020, and its financial performance and cash flows for the year then ended, in accordance with International Financial Reporting Standards (IFRS).

Basis for Qualified Opinion

During our audit, we identified concerns regarding the acquisition of a property from a former staff member. The acquisition process was conducted in a hurried manner and exceeded the capital expenditure provisions for the period. We were unable to obtain sufficient appropriate audit evidence to conclude that the transaction was conducted at arm’s length and in the best interest of the company. As a result, we are unable to determine whether any adjustments might be necessary in respect of the value of the property or related disclosures.

e. Discuss the composition of items that could be marked “For Partner’s Attention” during the conclusion of an audit process. (4 Marks)

Answer: Items that could be marked “For Partner’s Attention” during the conclusion of an audit process include:

1. Significant Audit Findings: Issues that may have a material impact on the financial statements, such as potential fraud, unusual transactions, or significant misstatements.
2. Areas of Disagreement: Disagreements between the audit team and management or between joint auditors that require resolution at the partner level.
3. Judgmental Issues: Areas requiring significant professional judgment, such as estimates, valuations, or impairment assessments, which need partner review and approval.
4. Regulatory or Compliance Issues: Matters that involve non-compliance with laws and regulations, which could have legal or financial implications for the entity.