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Caa 300: Auditing Two Question Paper

Caa 300: Auditing Two

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2009

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UNIVERSITY EXAMINATIONS: 2009/2010
THIRD YEAR STAGE I EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CAA 300: AUDITING TWO
DATE: DECEMBER 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer question ONE and any other TWO questions
QUESTION ONE (30 MARKS)
a) Why are systems of internal control in an organization of any concern to the auditor of that
organization? (15 Marks)
b) List five internal control weaknesses you are likely to find in a big purchasing and stores
department of an organization which does not have a sound internal control system. In each
case, explain how the organization will suffer if the weakness is not corrected.
(15 Marks)
QUESTION TWO (20 MARKS)
Explain using suitable illustration/expressions the following terms:
(a) Systems based audit. (7 Marks)
(b) Vouching audit. (6 Marks)
(c) Balance sheet audit (7 Marks)
QUESTION THREE (20 MARKS)
a) Elucidate the salient content features of accounting standards explaining the reasons as to why
Kenya adopted the international accounting standards (6 Marks)
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b) Describe three factors that affect materiality (6 Marks)
c) Explain the meaning of the following terms in relation to audit risk.
i). Inherent risk
ii). Control risk
iii). Detection risk
iv). Sampling risk (8 Marks)
QUESTION FOUR (20 MARKS)
In the context of international standard of Auditing (ISA) 560 (subsequent events):
(a) Outline the audit objectives of reviewing subsequent events. (6 Marks)
(b) Describe the audit procedures an auditor should perform to identify subsequent events.
(10 Marks)
(c) Summarize an auditor’s duties with respect to subsequent events discovered between the
date of the audit report and the date that the financial statements are presented at the
company’s annual general meeting (AGM) (4Marks)
QUESTION FIVE (20 Marks)
An auditor has a duty to verify all the assets and liabilities appearing in the client’s balance sheet. He
also has a duty to verify that there are no other assets which have been left out from the balance sheet.
(a) Explain the importance of the fixed assets register to an auditor in the verification of the
client’s fixed assets. (8 Marks)
(b) With respect to each of the following documents, explain the information that an auditor would
verify in relation to a client’s assets and liabilities:
i) Motor vehicle registration document.
ii) Supplier’s statement.
iii) Hire purchase agreement for the purchase of office equipment.
iv) Fire insurance policy for property and buildings. (12 Marks)

Caa 300: Auditing Two Question Paper

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