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Auditing I Question Paper

Auditing I

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2009

UNIVERSITY EXAMINATIONS: 2009/2010
SECOND YEAR STAGE II EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CAA 203 A: AUDITING I
DATE: DECEMBER 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer question ONE and any other TWO questions
QUESTION ONE (30 MARKS)
i. a). Internal auditors are expected to apply and uphold certain principles. Explain five such
principles (10 Marks)
b). Differentiate between internal audit and statutory audit. (5 Marks)
c). what do you mean by the term `surprise checks'? For what purposes surprise visit is
necessary? (3 Marks)
ii. (a) Discuss whether it is practicable and desirable, within the limits of procedures and costs,
for the auditor to accept a general responsibility to detect fraud and other irregularities
(5 Marks)
iii. ‘Auditing Planning’ contemplates knowledge of the business on the part of the auditor. In this
context, you are required to answer the following:
a) What are general matters to be considered by an auditor while taking up a new
engagement? (3 Marks)
b) What are the major sources of obtaining information about the client’s business?
(4 Marks)
QUESTION TWO (20 MARKS)
Tabia Mbaya company ltd. has undergone a substantial growth over the last years. Your firm,
Musikari & Associates (CPA) has received a request from the company for an invitation to become
2
their auditors for the financial year ending 31st December 2009.
Required:
i. What preliminary review procedures would you carry out upon the appointment? (5 Marks)
ii. Why should an auditor hold discussion with the client senior staff? (5 Marks)
iii. Why is communication with the previous auditor significant in the change of professional
appointment? ( 5 Marks)
iv. Outline the purpose of an engagement letter to the audit of a client. (5 Marks)
QUESTION THREE (20 MARKS)
In relation to the audit report, explain the following
i. Limitations in the scope of the audit (5 Marks)
ii. Circumstances of disagreement (5 Marks)
iii. Except for opinion (5 Marks)
iv. Material but not pervasive (5 Marks)
QUESTION FOUR (20 MARKS)
a) Discuss the auditor’s responsibilities with regard to the detection and prevention of frauds
and errors (6 Marks)
b) Explain the action to be taken by an auditor if the letter of representation is not provided
(4 Marks)
c) Define the term accountant lien (2 Marks)
d) Distinguish between “in-house review” and “peer review” (4 Marks)
e) Define the term teeming and lading (4 Marks)
QUESTION FIVE (20 MARKS)
You are the partner in charge of training in your firm. A new audit trainee has asked you to advise him
on the reliability, relevance and sufficiency of the following types of third party audit evidence.
a) Valuation of land and buildings by valuer
b) The replies to debtors’ circularization
c) The letter received from client bank
Write a report to the new trainee touching on the reliability, relevance and sufficiency of the above
audit evidence. (20 Marks)

Auditing I Question Paper

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