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Auditing Ii (Sunday) Question Paper

Auditing Ii (Sunday)

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2011

UNIVERSITY EXAMINATIONS: 2010/2011
THIRD YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
CAA 300: AUDITING II (SUNDAY)
DATE: AUGUST 2011 TIME: 2 HOURS
INSTRUCTIONS: Answer question ONE and any other TWO questions
Question One
a) The internal control system encompasses all the policies and procedures adopted by the
management of an entity to assist in achieving the management objectives.
Required:
i) Briefly explain the meaning of the term “control procedures” (5 Marks)
ii) What is the importance of segregation of duties as a control procedure? (5 Marks)
iii) List and briefly explain five control procedures that an internal control system over sales aims to
achieve (5 Marks)
iv) Explain the inherent limitations of an internal control system (5 Marks)
b) Describe the factors that an external auditor would look at before placing a reliance on the work of an internal auditor (10 Marks)
Question Two
a) ‘’The auditor must not only be independent but must be seen to be independent ‘’ briefly explain on
this statement. (4 Marks)
b) Suggest how the independent of the auditor may be strengthened. (4 Marks)
c) Explain the challenges that auditors face in the process of being independent. (4 Marks)
2
d) Outline the ways in which an auditor may be held criminally liable in the course of his audit duties .
(6 Marks)
e) Briefly explain what is meant by “auditor’s duty of due care’’ (2 Marks).
Question Three
Your firm audits Wanachama Timber Ltd and you are planning the audit of stock and work-in-progress
for the year ended 30th June 2009.Wanachama Timber Ltd determines the value of stock in its financial
statements by the year end stock take.There is no perpetual stock inventory system although the stock
is counted quarterly for the purposes of management accounting.
Required
(a) State the areas you will expect the client stock taking instruction’s to cover (12 Marks)
(b) Describe the work you will perform and the matters you will need to record at the stock take
attendance (8 Marks)
Question Four
a) Audit sampling is a technique for drawing conclusions about the characteristics of a population by
testing a sample drawn there from.Internal and external auditors use it for both tests of control and
substantive testing.
Required:
a) Distinguish between the following:
i) Judgment sampling and statistical sampling (4 Marks)
ii) Risk of under reliance and risk of over reliance (4 Marks)
iii) Block selection and stratification (4 Marks)
b) You are an auditor who has been invited in a Company XYZ Ltd.The company has been facing
unusual flunctuations in its financial statements for the year ended 31st July 2008.You decide to use
analytical review in the company.
Required:
i) Briefly describe the two ratios that would interest you in your ratio analysis process
(4 Marks)
ii) What factors would you consider in planning the analytical review procedures (4 Marks)
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Question Five
Many auditors now use laptop computers to perform various audit tasks. However, if audit firms use
laptop computers they risk data being corrupted and appropriate controls must therefore be put in place
to prevent the corruption of data.
a) Explain six ways which auditors can use laptop computers in their audit work(other than computerassisted
audit techniques (6 Marks)
b) Explain the computer assisted audit techniques listed below;
i) Embedded audit facilities (2 Marks)
ii) Integrated test facilities (2 Marks)
c) Briefly describe two types of software that might be used by auditors in their work other than
Computer Assisted Audit Techniques (4 Marks)
d) Describe the controls that auditors should implement when using laptop computers on audits
(6 Marks)

Auditing Ii (Sunday) Question Paper

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