Assignment Question PHONES ANYWHERE You are the partner in charge of a four partner firm of Chartered Accountants. Your firm has been invited to tender for the audit of Phones Anywhere for the year ended 31 December 2019. Phones Anywhere was established two years ago, and it provides a mobile phone service for in (e) (f) (9) (h) (k) iduals and businesses. The system being established by the company comprises: small portable mobile phones, which allow subscribers (users) to contact or be contacted by any other telephone. the mobile phones can be used within range of a local relay station, which receives calls from and sends calls to the mobile phones. the local relay stations are linked to a central computer which connects the calls to other users. Frequently, this is through a competitor's telephone network. currently, the local relay stations cover one large city with a population of about 1,000,000. Within the next year the system will cover all large cities in your country with a population of over 250,000. By 2025, the system will cover all motorways and cities with a population of over 100,000. Extending the coverage of the system will involve considerable capital expenditure on new relay stations and require additional borrowings. the cost of the relay stations and central computer are capitalised and are written off over six years. the mobile phones are manufactured by other companies and sold through retailers. Phones Anywhere does not sell the phones, but it pays $200 to the retailer for each phone sold and subscription signed by the customer to Phones Anywhere. This Payment is capitalised in the financial statements of Phones Anywhere and written off over four years subscribers are invoiced monthly with a fixed line rental and a variable call charge. Other operators are charged for the time spent by their customers contacting Phones Anywhere's subscribers (customers). These charges are logged and calculated by the company’s main computer. all the shares are owned by three wealthy individuals who are non-executive directors, They will receive a fixed salary, They do not plan to make any further investment in the company. establishing the network of relay stations and subscribers will result in the company making losses for at least three years. Current borrowings are about 20% of shareholders’ funds. Because of the substantial capital expenditure and trading losses, it is expected the company will be highly geared by 2022 as the company will not be profitable, the non-executive directors have decided that executive directors should receive a basic salary and a bonus based on the number of subscribers to the system. the owners plan to float the company on the Singapore Stock Exchange in 2022. The flotation will involve: (issuing new shares to the general public to provide funds for the company, and (i) the three non-executive directors selling some of their shares. You are aware that Phones Anywhere has a number of very large competitors, each of which has a large number of users and comprehensive coverage (i.e. over 90% of the Population are within range of a relay station).Required: (a) (b) () Consider the risks associated with the audit, (10 marks) Describe the ethical matters you should consider in deciding whether your audit firm should accept the audit. This should include considering whether your firm has the technical and logistical abilty to carry out the audit (10 marks) Come to a conclusion on whether you would advise your firm to accept or decline the audit, giving your principal reasons for coming to this decision. (5 marks) (Total: 25 marks)