未知题型 The equity beta of Fence Co is 0·9 and the company has issued 10 million ordinary shares. The market value of each ordinary share is $7·50. The company is also financed by 7% bonds with a nominal value of $100 per bond, which will be redeemed in seven years’ time at nominal value. The bonds have a total nominal value of $14 million. Interest on the bonds has just been paid and the current market value of each bond is $107·14.Fence Co plans to invest in a project which is different to its existing business operations and has identified a company in the same business area as the project, Hex Co. The equity beta of Hex Co is 1·2 and the company has an equity market value of $54 million. The market value of the debt of Hex Co is $12 million.The risk-free rate of return is 4% per year and the average return on the stock market is 11% per year. Both companies pay corporation tax at a rate of 20% per year.Required:(a) Calculate the current weighted average cost of capital of Fence Co. (7 marks)(b) Calculate a cost of equity which could be used in appraising the new project. (4 marks)(c) Explain the difference between systematic and unsystematic risk in relation to portfolio theory and the capital asset pricing model. (6 marks)(d) Discuss the differences between weak form, semi-strong form. and strong form. capital market efficiency, and discuss the significance of the efficient market hypothesis (EMH) for the financial manager. (8 marks)

未知题型 Trombone Co (Trombone) operates a chain of hotels across the country. Trombone employs in excess of 250 permanent employees and its year end is 31 August 2014. You are the audit supervisor of Viola & Co and are currently reviewing the documentation of Trombone’s payroll system, detailed below, in preparation for the interim audit.Trombone’s payroll systemPermanent employees work a standard number of hours per week as specified in their employment contract. However, when the hotels are busy, staff can be requested by management to work additional shifts as overtime. This can either be paid on a monthly basis or taken as days off.Employees record any overtime worked and days taken off on weekly overtime sheets which are sent to the payroll department. The standard hours per employee are automatically set up in the system and the overtime sheets are entered by clerks into the payroll package, which automatically calculates the gross and net pay along with relevant deductions. These calculations are not checked at all. Wages are increased by the rate of inflation each year and the clerks are responsible for updating the standing data in the payroll system.Employees are paid on a monthly basis by bank transfer for their contracted weekly hours and for any overtime worked in the previous month. If employees choose to be paid for overtime, authorisation is required by department heads of any overtime in excess of 30% of standard hours. If employees choose instead to take days off, the payroll clerks should check back to the ‘overtime worked’ report; however, this report is not always checked.The ‘overtime worked’ report, which details any overtime recorded by employees, is run by the payroll department weekly and emailed to department heads for authorisation. The payroll department asks department heads to only report if there are any errors recorded. Department heads are required to arrange for overtime sheets to be authorised by an alternative responsible official if they are away on annual leave; however, there are instances where this arrangement has not occurred.The payroll package produces a list of payments per employee; this links into the bank system to produce a list of automatic payments. The finance director reviews the total list of bank transfers and compares this to the total amount to be paid per the payroll records; if any issues arise then the automatic bank transfer can be manually changed by the finance director.Required:(a) In respect of the payroll system of Trombone Co:(i) Identify and explain FIVE deficiencies;(ii) Recommend a control to address each of these deficiencies; and(iii) Describe a test of control Viola & Co should perform. to assess if each of these controls is operating effectively.Note: The total marks will be split equally between each part. (15 marks)(b) Explain the difference between an interim and a final audit. (5 marks)(c) Describe substantive procedures you should perform. at the final audit to confirm the completeness and accuracy of Trombone Co’s payroll expense. (6 marks)Trombone deducts employment taxes from its employees’ wages on a monthly basis and pays these to the local taxation authorities in the following month. At the year end the financial statements will contain an accrual for income tax payable on employment income. You will be in charge of auditing this accrual. Required:(d) Describe the audit procedures required in respect of the year end accrual for tax payable on employment income. (4 marks)

未知题型 (a) Define the ‘three Es’ of a value for money audit. (3 marks)(b) ISA 230 Audit Documentation requires auditors to prepare audit documentation for an audit of financial statements on a timely basis.Required:Describe FOUR benefits of documenting audit work. (4 marks)(c) ISA 530 Audit Sampling applies when the auditor has decided to use sampling to obtain sufficient and appropriate audit evidence.Required:Define what is meant by ‘audit sampling’ and explain the need for this. (3 marks)