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Auditing Ii Question Paper

Auditing Ii

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2011

UNIVERSITY EXAMINATIONS: 2010/2011
SECOND YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
CAA 203 AUDITING I (DAY& EVE) (DAY+EVENING)
CAA 300: AUDITING II
DATE: DECEMBER2011 TIME: 2 HOURS
INSTRUCTIONS: Answer Question One and Any Other Two Questions
QUESTION ONE (30 marks)
You are an audit trainee involved in the audit of Top Quality Paints Ltd. For the financial year ended 31 December 2001. You have been assigned the responsibility for the audit of stocks and work in progress. Stocks and work in progress of the company comprise finished paint products, semi-processed paints and raw materials. You are now planning to attend the company’s annual inventory count.
Required:
a) Identify an briefly explain six specific matters you would like the company’s stocktaking instructions to address so as to ensure that the inventory is counted accurately (6 Marks)
b) Set out the tests you would carry out and the maters you would record in your working papers during your attendance. (8 Marks)
c) Audit firm should ensure that an independent review is undertaken for all its audits. Describe the matters which should be taken into consideration during an independent review of an audit.
(12 Marks)
d) Name and explain four quality control procedures which are applied by audit firms in order to enhance the quality of audit assignments. (4 Marks)
Question Two (20 Marks)
The basic principle of an auditor’s independence states that an auditor’s objectivity must be beyond question when conducting an audit.
(i) Explain the various instances in which an auditor’s independence may be compromised in
an audit assignment. (8 Marks)
(ii) Outline how an auditor can safeguard independence in all audit work. (4 Marks)
(iii)Highlight the role of audit committees in enhancing an auditor’s independence during an audit assignment. (8 Marks)
Question Three (20 Marks)
During the course of the audit of the payroll of your client, you have discovered that the officer in charge of the payroll has been deliberately maintaining on the payroll staff that have left the employment of the company and diverting their salaries to a secret bank account.
Required:
a) List the controls which should be instituted in order to prevent the occurrence of the fraud referred to above (10 Marks)
b) Identify the substantive tests that you would perform in respect of the salaries and wages of the employees (10 Marks)
Question Four (20 Marks)
An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. In most cases therefore, auditors are not expected to carry out a 100% check on clients’ records and transactions. Rather, they adopt a sampling approach in the conduct of their audit work.
Required:
(a) Briefly explain the following terms:
(i) Sampling risk. (3 Marks)
(ii) Tolerable error. (3 Marks)
(b) Identify four situations in which a sampling approach would not be appropriate.
(4 Marks)
(c) List and briefly explain five circumstances in which audit sampling would be
considered appropriate. (10 Marks)
Question Five (20 Marks)
Briefly outline the audit procedures you would carry out to verify the following items:
(a) Share capital. (4 Marks)
(b) Pending legal matters. (4 Marks)
(c) Property plant and equipment. (4 Marks)
(d) Trade creditors. (4 Marks)
(e) Revaluation reserve. (4 Marks)

Auditing Ii Question Paper

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