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Caa 300: Auditing Ii Question Paper

Caa 300: Auditing Ii

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2009

1
UNIVERSITY EXAMINATIONS: 2008/2009
THIRD YEAR STAGE 1 EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CAA 300: AUDITING II
DATE: APRIL 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer question ONE and any other TWO questions
QUESTION ONE\
a) Explain the meaning of the following terms in relation to audit risk
i. Inherent risk
ii. Control risk
iii. Detection risk
iv. Sampling risk (10 Marks)
b) i) What effect does materiality have on tests of control (3 Marks )
ii) Elaborate on the factors that affect materiality (7 Marks)
c) Discuss the contents of Accounting standards and explain the reasons as to why Kenya
adopted the International Accounting Standards (10 Marks)
QUESTION TWO
a) In the context of a computer based accounting system, explain the meaning of the following
terms
i. Application controls (4 Marks)
ii. General controls (4 Marks)
b) State six examples of controls to prevent unauthorized changes to data files that you would
expect to find in a new computer based accounting system (6 Marks)
2
c) A company wishes to change from an old computerized based accounting system. Explain
how and why both systems should run parallel to the change over the new system (6 Marks)
QUESTION THREE
a) Describe the circumstances under which an auditor may be liable for damages for material
misstatement in publishing accounts on which he has expressed an audit opinion. (4 Marks)
b) Under which circumstances can he avoid liability (4 Marks)
c) Identify the categories of parties who may institute successful legal claims against the auditor
emphasizing the basis a court of law would use to assess the value of damages (7 Marks)
d) iii) What specific actions can an individual auditor or audit take to minimize liability arising
from audit risk (5 Marks)
QUESTION FOUR
Events or transactions arising after the balance sheet date are very important to the Auditor.
Required
a) Give examples and types of such events and transactions (4 Marks)
b) Explain the responsibility of the auditor in respect of events or transactions occurring between:
i. The dates the accounts are approved and signed by the board and the date the accounts
are signed by the auditor.
ii. The date the accounts are signed by the auditor and the date of the Annual General
meeting.
iii. The end of a financial year and the completion of the audit fieldwork
iv. The end of the fieldwork and the date the account are approved and signed by the
board. (16 Marks)
QUESTION FIVE
a) Substantive tests are the tests of items making up the accounting balances. Discuss the work
involved when carrying out the substantive tests (10 Marks)
b) Discuss the matters that are of importance to the auditor in making Auditors judgment about
the nature and extent of substantive tests. (10 Marks)

Caa 300: Auditing Ii Question Paper

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