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Acct 412: Audit Practice And Investigations Question Paper
Acct 412: Audit Practice And Investigations
Course:2011
Institution: Kabarak University question papers
Exam Year:2011
INSTRUCTIONS:
1. This paper comprise of FOUR questions
2. Answer all four questions
3. Marks for each question are given at the end of every question
4. Constructive and logical thinking coupled with precision will be rewarded
5. Time 2 hours.
QUESTION ONE
a) Clearly and with relevant examples explain under what circumstances an investigation
would be called for as compared to an audit.
b) Kalaba and sons is a sole proprietor business that has been in operation for the last twenty
years
They have been the sole suppliers of raw materials to three companies that deal in scrap
metals. A new company that has entered the field proposes to buy Kalaba and sons.
However, they have a few concerns concerning the operations of Kalaba and sons. They
are also concerned about the profitability, liquidity, future prospects and the integrity of
the management.
Required:
i. Imagine that you are Mr. Kalaba, issue in a memorandum form, instructions to a
prospective auditor to carry out an investigation and inform you accordingly.
(10 marks)
ii. Imagine that you are the appointed auditor and you are instructing your junior on how
to write the report of the investigations of the above assignment. Explain to him the
different parts that the report should include. (10 marks)
QUESTION TWO.
i. Auditors operate under an environment of uncertainty as relates to their liability resulting
from their audit reports. Their liability arises out of the losses that may befall an entity
that, as a result of relying on the auditor¶s report to make financial decisions may incur
losses.
Required:
Using examples whenever necessary clearly explain the liability that the auditors incur
every time they issue an audit report:
To their own clients (4 marks)
To the government (4 marks)
To third parties. (4 marks)
ii. Independence of the auditor is a major ingredient in determining the reliability of the
auditor¶s report
Required.
Using the guidelines issued by ICPAK explain the meaning of auditor¶s independence.
(8 marks)
QUESTION THREE
As the prospective external auditor of Mburo and mboro partners, you have been provided with
the following information in relation to the assignment;
1) The partnership is involved in importing and distributing new and used motor vehicles
where the motor vehicles are either imported as a complete unit or as a completely
knocked down kit which they later assemble into complete units.
2) To increase the demand of the motor vehicles, the partners import the corresponding
spares to meet the necessary demand as well as training personnel in servicing of the
vehicles.
3) The partners own a number of assembly plants, show rooms, yards and motor-spares
shops spread all over the East African region
4) The partners have a work force of one thousand two hundred and forty one.
5) The partners employ an elaborate computerized inventory tracking system which also
maintains purchases and sales records.
Required
a) Explain the elaborate system that would be required for you to be a bona-fide auditor of
the partners. (6 marks)
b) In a systematic and detailed analysis, explain how you would go about assets verification
of the partnership (6 marks)
c) Explain the major steps you would take in order to carry out a comprehensive audit of the
partnership. (6 marks)
QUESTION FOUR.
You are a senior partner in Ujuzi certified public accountants of Kenya. You have been invited to
present a paper on audit reports. You are a very busy person and you decide to instruct your
personal secretary to write the paper for you. Your secretary has scanty knowledge in
accounting. Write to your secretary instructions on what to write. (20 marks)
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