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Accf 434:Auditing Ii Question Paper
Accf 434:Auditing Ii
Course:Business Administration
Institution: Kenya Methodist University question papers
Exam Year:2011
KENYA METHODIST UNIVERSITY
END OF 3''RD ''TRIMESTER 2011 EXAMINATIONS
FACULTY : SCHOOL OF BUSINESS
DEPARTMENT : BUSINESS ADMINISTRATION
UNIT CODE : ACCF 434
UNIT TITLE : AUDITING II
TIME : 2 HOURS
Instructions:
Answer question ONE and any other two questions, write and express yourself legibly
Question one
Classify the following audit opinion into:
Unqualified opinion
Qualified opinion
Negative opinion
Disclaimer opinion
In our opinion and best of information and according to information given to us, the balance sheet, and profit and loss account give a true and fair view of the, state of affair and working results
"The company has not provided for depreciation on plant and machinery in respect of double ship working resulting in understatement of depreciation and overstatement of net profits for the year, plant and machinery, reserve and surplus to the extent of shs. 400,000 each with consequent effect on the earning per share subject to the above, we report the balance sheet and profit and loss account give a true and fair view…"
The said accounts read in conjunction with notes and detailed report of directors on matters relating to excise and give true and fair view
"Interest and deferred sales tax has been considered in the accounts. We are unable to comment on the possible liability that may arise for such interest and on the consequent impact on the loss for the period. Subject to the above, we report that the balance sheet and profit and loss account give a true and fair view……"
"In view of our comments made above, we are of the opinion that the balance sheet and profit and loss account do not give a true and fair view……"
"There are four factories of the company situated in Somalia. Due to the described civil conditions in that country, the audit reports of the aforesaid factories have not been received. In view of the significance of this matter, we are able to state whether the balance sheet and profit and loss give a true and fair view ………….
(6mks)
The auditor should obtain relevant and reliable evidence to enable him to draw reasonable conclusions there from
Required
List the various kinds of evidence which might be available to an auditor giving an illustration of each king
(10mks)
What general procedures should be gone through to obtain third party evidence
(4mks)
"The standards of external auditors come from pronouncements of American institute of certified public accounts" what are these standards narrate them clearly
(10mks)
Question Two
The auditor liability is a major concern to the accounting profession world- wide
Explain how criminal liability of an auditor arises under the companies act
(7mks)
Summarize the circumstances under which an auditor may be liable to third parties
(4mks)
Quoting at least two legal cases and their decision explain an auditors liability for misfeasance and negligence
(9mks)
Question Three
The auditor of a limited company was not successful in persuading the director of a company to amend the accounts on the points proposed by him. Prepare a draft of the report that the auditor will submit in this case. Take imaginary points to qualify the report (20mks)
Question Four
As an auditor comment on the following emaciate the general principles of verification of assets
(5mks)
How will you vouch and or verify the following
Research and development expenses
Work in progress
Bank balances
Purchase return
Advance given to a director of a company
(15mks)
Question Five
Discuss the purpose of cost audit and circumstances under which a cost audit is desirable
(8mks)
Explain the meaning of the following terms in the context of the application of sampling techniques in an auditing situation
Risk of under reliance
Risk of over reliance
Risk of incorrect acceptance
Risk of incorrect rejection
(12mks)
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