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Acct 412: Auditing Practice And Investigations Question Paper
Acct 412: Auditing Practice And Investigations
Course:Bachelor Of Commerce
Institution: Kabarak University question papers
Exam Year:2009
COURSE CODE: ACCT 412
COURSE TITLE: AUDITING PRACTICE AND
INVESTIGATIONS
STREAM: Y4S1
DAY: THURSDAY
TIME: 2.00 – 4.00 P.M.
DATE: 26/03/2009
INSTRUCTIONS:
1) This paper comprise of four questions.
2) You are required to answer all questions.
3) Marks for each question are shown at the end of the question.
4) Candidates are advised to be articulate precise and to the point
QUESTION ONE
Professionals like accountants are not allowed to advertise their businesses. However this
attitude is being challenged but the fact still remains that professional engagements can
never be touted like wares and other services. To overcome this handicap accountants in
your branch of ICPAK have invited you to address a public gathering in which you are
expected to highlight i) what is auditing, ii) the importance of auditing, iii) the objectives
of auditing and iv) the benefits that an unincorporated organization may derive out of
having its books audited
Required
Prepare a memorandum to be presented to the branch chairman outlining what
you intend to cover in your presentation. (20 marks)
QUESTION TWO
A member of the disciplinary committee of ICPAK has approached you with the
following problems:
1) Mutiso who recently was awarded a practicing certificate by the institute of
certified public accountants has done the following; (a) organized a major “bash”
to open his new office in Nakuru. He has also published his life history giving his
academic exploits and professional experience. The theme of his ‘bash’ is,
“Accountancy and auditing services like no other”. He has also engaged some non
accountants on commission basis to help him acquire new clients.
(b) Mr. Kazi Safi, a long standing accounting practitioner, has acquired a 50% stake
in a company where he is also the auditor. For him to overcome the problem of
independence,
He has decided to surrender the job to a former class mate who also happens to be
his daughter’s father in law.
(c) Ms Haki has been requested to be the external auditor of a company Kweli Ltd.
due to frustration by the management, The auditor has no reservation to Ms haki
taking over, but has made the following disclosures, (1) The auditor could not get
evidence to support existence of stock worth two million, (11) The management
has incurred a management expense amounting to fifteen million without
corresponding board minutes
(111) The management has over time been under providing for bad debts to an
extent that they have ended up carrying unrecoverable assets to the value of
twenty million.
Required
You are to write a memorandum highlighting the problems and suggesting
possible courses of action by disciplinary committee. (NB you are expected to
support your arguments fully) (20 marks)
QUESTION THREE
For the auditor to form an opinion as to whether the financial statements present a true
and fair view of the state of affairs he needs to follow events happening immediately after
the balance sheet (post balance sheet events). What is the significance of these events and
how do they affect an auditor’s report. (10 marks)
QUESTION FOUR
(a) Sampling is an important part of the audit exercise. It has been variously argued
that sampling makes auditing a guessing game. Present the case for and against
sampling in auditing. What steps should an auditor take to ensure that sampling
risks are minimized? (7 marks)
(b) Company act cap 486 sec 162(1) specifies the matter that should be included in an
auditor’s report. Enumerate the provisions and comment on the extent to which
these provisions meet the user’s needs. (7 marks)
(c) What are the ethical issues in receiverships and liquidations as far as auditing is
concerned. (6 marks)
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