Albert Ltd is a sports equipment distributor based in the UK. The company was started five years ago by best friends Allan and Robert aged 30 and 28 respectively. The company has recently reached turnover levels of £6m and so requires a statutory audit for the first time. The company’s current accountants are not in a position to take on the audit and so the Albert friends have approached your firm. Initial discussions with the brothers reveal that they have ambitious growth plans for the company, which will require substantial outside investment. The long - term objective is to list the company within the next ten years. The company currently has a five-year bank loan facility in place and are hoping to negotiate a further loan in the near future in order to fund the initial stages of their growth plan.The structure of the company is quite simple with the friends being the only shareholders and directors. The brothers take an active role in the business, priding themselves on their hands on, down to earth approach to all parts of the business. Their financial knowledge however is limited and to date they have relied on one ACCA qualified accountant to manage the day - to - day bookkeeping and accounts and their accountants to prepare quarterly management and annual accounts.Your firm is a ten - partner practice with several years’ experience auditing owner- managed businesses. Clients include others in the distribution sector and some small retail companies including one that trades with Albert Ltd.Required:a) Detail the issues you should consider in deciding whether to accept the audit of Albert Ltd. in accordance with ISA 210 Agreeing the Terms of Audit Engagements. Include any further information you will require before making a decision. Your answer should include issues specific to the scenario above and other general factors.b) If your firm decides to accept the audit, what action must they take to formalise their appointment?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Albert Ltd is a sports equipment distributor based in the UK. The company was started five years ago by best friends Allan and Robert aged 30 and 28 respectively. The company has recently reached turnover levels of £6m and so requires a statutory audit for the first time. The company’s current accountants are not in a position to take on the audit and so the Albert friends have approached your firm. Initial discussions with the brothers reveal that they have ambitious growth plans for the company, which will require substantial outside investment. The long - term objective is to list the company within the next ten years. The company currently has a five-year bank loan facility in place and are hoping to negotiate a further loan in the near future in order to fund the initial stages of their growth plan.The structure of the company is quite simple with the friends being the only shareholders and directors. The brothers take an active role in the business, priding themselves on their hands on, down to earth approach to all parts of the business. Their financial knowledge however is limited and to date they have relied on one ACCA qualified accountant to manage the day - to - day bookkeeping and accounts and their accountants to prepare quarterly management and annual accounts.Your firm is a ten - partner practice with several years’ experience auditing owner- managed businesses. Clients include others in the distribution sector and some small retail companies including one that trades with Albert Ltd.Required:a) Detail the issues you should consider in deciding whether to accept the audit of Albert Ltd. in accordance with ISA 210 Agreeing the Terms of Audit Engagements. Include any further information you will require before making a decision. Your answer should include issues specific to the scenario above and other general factors.b) If your firm decides to accept the audit, what action must they take to formalise their appointment?

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