Get premium membership and access revision papers, questions with answers as well as video lessons.
Caa 203 Auditing I (Day&Amp; Eve) Question Paper
Caa 203 Auditing I (Day&Amp; Eve)
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2011
1
UNIVERSITY EXAMINATIONS: 2010/2011
SECOND YEAR EXAMINATION FOR THE BACHELOR OF COMMERCE
CAA 203 AUDITING I (DAY& EVE)
DATE: DECEMBER 2011 TIME: 2 HOURS
INSTRUCTIONS: Answer ALL Questions
Question One (30 Marks)
You are approached by Mr.Ndolo the Managing director of Biscuit Ltd Company, a company in
which you are the auditor.He feels that there is no need for your firm to carry out an interim audit
function of the year ended 31st December 2010.He states that interim audit is only a way of
increasing your audit fees and it adds no value to his company.
Required:
(a) State and explain why an interim audit is necessary and how it can be of benefit to the
client (10 Marks)
(b) What work normally carried out at the final audit could be carried out at the interim stage
(5 Marks)
(c) Explain why an audit is necessary for the limited company (5 Marks)
(d) Identify and explain the responsibilities of the directors in relation to the accounting
function of the company (10Marks)
Question Two (20 Marks)
Clarion Bank Ltd. is a newly quoted company on the stock exchange. During its initial public
offering, the company’s financial statements audited by Kamau and Associates (Certified Public
Accountants) were made public for use by potential investors. On the basis of the audited
financial statements, Paul Kiptoo bought the company’s shares. After trading on the stock
exchange for six months, the company’s share price had fallen significantly, after it was
2
discovered that the financial statements contained misleading information. Paul Kiptoo intends
to sue the audit firm for compensation.
Required:
(a) Explain to Paul Kiptoo the basis on which he can sue the audit firm for the loss
suffered as a result of the fall in the share price. (4 marks)
(b) Explain to Kamau and Associates (Certified Public Accountants) how they can
minimize potential liability for professional negligence (5 marks)
(c) Explain what the duties that are expected to be done by the auditor (5 Marks)
(d) Explain the circumstances in which an auditor should disclose the unlawful acts of a client
company to the relevant authorities. (6 marks)
(Total: 20 marks)
Question Three (20 Marks)
(a) When an auditor has reservations on any matter that is considered material to the financial
statements, the auditor may introduce qualifying remarks in his audit report.
Required:
(i) Summarise the features of a qualified audit report. (6 marks)
(ii) Explain the consequences of a qualified audit report to a company. (8 marks)
(b) State and explain the type of opinion that should be expressed in the auditor’s report in each of the
following situations:
(i) A large debtor is unable to pay a client company and the directors have not made a
provision for bad and doubtful debts. (3 marks)
(ii) A client company has changed its accounting policy during the current financial
year. (3 marks)
(Total: 20 marks)
Question Four (20 Marks)
(a) Briefly explain how an auditor is appointed under the Companies Act. (5 marks)
(b) The basic principle of an auditor’s independence states that an auditor’s objectivity must be
beyond question when conducting an audit.
(i) Explain the various instances in which an auditor’s independence may be
compromised in an audit assignment. (6 marks)
(ii) Outline how an audit firm can safeguard independence in its audit work.
(4 marks)
3
(iii) Highlight the role of audit committees in enhancing an auditor’s independence
during an audit assignment. (5 marks)
(Total: 20 marks)
Question Five (20 Marks)
ISA 500 Audit evidence states that the auditors objective ‘is to design and perform audit
procedures in such a way as to enable the auditors obtain sufficient evidence to be able to draw
reasonable conclusions on which to base the auditors opinion’
Required
(a) Discuss the factors which will influence the auditors judgement concerning the sufficiency
of audit evidence obtained (4 Marks)
(b) Explain four methods that would likely to be used in gathering audit evidence in a
company (8 Marks)
(c) It is important that an auditor plans his work as he tries to find out his audit evidence in a
company. Briefly describe the need for audit planning by an auditor (4 Marks)
(d) What problems might be encountered in audit planning and how can they be minimized.
(4 Marks)
More Question Papers
Popular Exams
Return to Question Papers