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Auditing Question Paper

Auditing

Course:Cpa

Institution: Strathmore University question papers

Exam Year:2008

QUESTION ONE
The following methods of defalcation or fraud by employees are sometimes encountered.
a. Dummy names on payrolls (6 marks)
b. Teeming and lading (7 marks)
c. Fictitious credit notes or sales return payments for fictitious purchases. (7 marks)
(Total 20 Marks)
QUESTION TWO
What normal audit procedure would be likely to disclose each of such irregularities?
The principal objective of the verification of liabilities and commitments is to form an
opinion as to their completeness, existence, valuation and presentation in the financial
statements.

Required:
a. Why is it essential for the auditor to examine statements received from suppliers of goods and services? (5 marks)
b. What procedures would the auditor follow to obtain assurance that at the year-endall goods received on credit by the client are included both in inventories and creditor balances. (5 marks)
c. How would the auditor ensure that the amounts accrued for wages and salaries due but unpaid were properly compiled? (5 marks)
d. What tests would the auditor need to undertake to ensure that capital commitments at year end were fairly stated? (5 marks)
(Total 20 Marks)
QUESTION THREE
You are the auditor of Quick Meals Ltd. a company which operates a restaurant in the middle of the city. Every five years the premises are completely renovated and the company created a provision in the accounts so as to charge the expense to accounting periods in a consistent manner. You are reviewing the accounts for the year following the most recent renovation.
a. Define the words ‘provision’ and reserve. (6 marks)
b. Draft a paragraph for the statement of accountancy policies which would explain the provision to persons not familiar with accounting (6marks)
c. What steps would you take this year to satisfy yourself that the provision for renovation was properly stated? (8 marks)
(Total 20 Marks)
QUESTION FOUR
a) What is meant by the term verification? (4 marks)
b) Explain how you would verify the following items appearing in the balance sheet:

i. Ordinary share capital - Shs.150 million. (4 marks)
ii. Capital and revenue reserves - Shs.25 million. (4 marks)
iii. Share premium Shs.5 million . (4 marks)
iv. Long term loans from the bank- Shs.10 million. (4 marks)
(Total 20 Marks)
QUESTION FIVE
a) What are post balance sheet events? (4 marks)
b) What procedures would you carry out in order to obtain appropriate knowledge

Auditing Question Paper

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