（c) Explain the possible impact of RBG outsourcing its internal audit services on the audit of the financial
statements by Grey & Co. （4 marks)

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• 3 You are the manager responsible for the audit of Seymour Co. The company offers information, proprietary foods and
  medical innovations designed to improve the quality of life. （Proprietary foods are marketed under and protected by
  registered names.) The draft consolidated financial statements for the year ended 30 September 2006 show revenue
  of $74·4 million （2005 – $69·2 million), profit before taxation of $13·2 million （2005 – $15·8 million) and total
  assets of $53·3 million （2005 – $40·5 million).
  The following issues arising during the final audit have been noted on a schedule of points for your attention:
  （a) In 2001, Seymour had been awarded a 20-year patent on a new drug, Tournose, that was also approved for
  food use. The drug had been developed at a cost of $4 million which is being amortised over the life of the
  patent. The patent cost $11,600. In September 2006 a competitor announced the successful completion of
  preliminary trials on an alternative drug with the same beneficial properties as Tournose. The alternative drug is
  expected to be readily available in two years time. （7 marks)
  Required:
  For each of the above issues:
  （i) comment on the matters that you should consider; and
  （ii) state the audit evidence that you should expect to find,
  in undertaking your review of the audit working papers and financial statements of Seymour Co for the year ended
  30 September 2006.
  NOTE: The mark allocation is shown against each of the three issues.

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• （b) State, with reasons, the principal additional information that should be made available for your review of
  Robson Construction Co. （8 marks)

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• （c) In April 2006, Keffler was banned by the local government from emptying waste water into a river because the
  water did not meet minimum standards of cleanliness. Keffler has made a provision of $0·9 million for the
  technological upgrading of its water purifying process and included $45,000 for the penalties imposed in ‘other
  provisions’. （5 marks)
  Required:
  For each of the above issues:
  （i) comment on the matters that you should consider; and
  （ii) state the audit evidence that you should expect to find,
  in undertaking your review of the audit working papers and financial statements of Keffler Co for the year ended
  31 March 2006.
  NOTE: The mark allocation is shown against each of the three issues.

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• （iii) the warranty provision. （3 marks)

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• （c) Explain the extent to which you should plan to place reliance on analytical procedures as audit evidence.
  （6 marks)

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