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Accf 432:Auditing I Question Paper

Accf 432:Auditing I

Course:Business Administration

Institution: Kenya Methodist University question papers

Exam Year:2012

KENYA METHODIST UNIVERSITY

END OF 2ND TRIMESTER 2012(EVENING) EXAMINATIONS
SCHOOL : BUSINESS AND ECONOMICS
DEPARTMENT : ACCOUNTING AND FINANCE
UNIT CODE : ACCF 432
UNIT TITLE : AUDITING I

TIME: 2 HOURS

Instructions:

Question One

The external auditor of a company uses the system of internal control to determine the nature, content and timing of his work.

Whose responsibility is it to ensure the existence of strong system of internal controls?

(8mks)

What value does a client obtain from the external auditor with respect to internal control? Explain how the auditor provides that value . (10mks)

What is the main role of internal auditor with respects to internal controls?

(6mks)

How does the external auditor assure himself that internal audit is effective?

(6mks)

Question Two

The auditing guideline on planning, controlling and recording "Contains the following statement with regard to working papers: audit working papers should always be sufficiently complete and detailed to enable an experienced auditor with no previous connections with the audit subsequently to ascertain from them what work was performed and to support the conclusions reached"

Required

Describe four benefits that the auditor will obtain form working papers that meet the above requirements.
If the auditor has discovered that a claim for damages in a significant item requiring exercise of judgment in the financial statements, show what type of evidence on the matter the audit or must record in the current file. Give reasons for the inclusion of such evidence in the current file. (5mks)
List three types of information which is normally retained in the audit file and state why such information should be available for reference in the course of an audit

Comment on the desirability of using standardized working papers and give an example of such working paper and its use.

(5mks)

Question Three

The company act (cap 486) sets out the duties of the auditors for accompany in respect of his report and other matters.

Required

State four statutes under which the Act requires auditors to quality their report.

(10mks)

State four circumstances in which the auditor may qualify their report owing to inherent uncertainty.

State four types of circumstances in which the auditor may qualify their report as a result of disagreements with the directors.

(5mks)

Question Four

"Actions must be specifically taken to prevent the occurrences of fraud involving the assets of the company" Finance director of ACGC limited addressing accounting staff of the company. Particular interest to the directors are:

The safety of unclaimed wages
The receipt of cash from customers
The company’s cheque book
Issue of credit notes to debtors.

Required

For each of the above, explain how fraud can occur in the area. (10mks)

What controls should be in place to prevent the occurrence of end of the frauds described in (a) above.

(10mks)

Question Five

Members of the accounting profession in common with other profession have taken steps to reduce professional risk as far as possible

Required

With reference to accounting profession, what is audit risk?

(7mks)

Outline the steps that the Institute of Certified Public Accountants of Kenya has taken to reduce the individual auditors exposure to risk.

(6mks)

Suggest specific actions an individual auditor on audit firm could take to minimize liability arising from audit risk.

(7mks)

Accf 432:Auditing I Question Paper

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