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Auditing And Assurance Question Paper

Auditing And Assurance

Course:Cpa Part I

Institution: Orbit School Of Management Studies question papers

Exam Year:2009

Orbit School of Management Studies

CPA PART I
AUDITING

Answer any FIVE questions.
ALL questions carry equal marks.

QUESTION ONE
a.
i. Define the term "joint audits" (2mks)

ii. Highlight the disadvantages of joint audits (6mks)

b. "An auditor should plan the audit work so that the audit will be performed in an effective manner"

Required:
i. Explain the importance of adequate planning in ensuring an audit is performed in an defective manner (6mks)

ii. Identify the difficulties experienced by an auditor when planning and audit assignmet (6mks)

QUESTION TWO
"Auditors'' independence is both a matter of fact and a matter of appearance"

Required:
a. Explain the reasons why an auditor''s independence is important (8mks)

b.
i. Distinguish between independence in fact and independence in appearance (4mks)

ii. Identify and explain the activities that are likely to affect an auditor''s independence in appearance but may not affect his independence in fact (8mks)

QUESTION THREE
Audit sampling means drawing conclusions about an entire set of data by testing a representative sample of items.

Required:
a. Define the following terms:
i. Sampling unit (2mks)
ii. Non sampling risk (2mks)

b. Name and explain four characteristics of an ideal sample (8mks)

c. Describe the factors which an auditor should consider when determining the size of a sample (8mks)

QUESTION FOUR
a. Briefly explain the conditions in which it would be acceptable for an external auditor to rely upon the work carried out by the internal auditor of a client (8mks)

b. Dumu Battery Manufacturing Ltd. has 1,000 workers who are paid weekly wages. As a member of the team auditing the company''s wages, you have obtained the following information relating to the internal control system.

1. The workers are paid on the basis of hours worked and output produced.
2. The hours worked are recorded on a clock card and the output produced by each worker confirmed by the foreman and supervisors at the end of each day.
3. Wages are paid in cash at the end of each week on a Saturday.
4. Appointment of workers is authorised by the company''s human resources manager. The human resources department maintains records of all workers and their rates of pay.

Required:
i. Assuming you decide not to attend the company''s wages payout sessions, suggest other audit techniques you would use to confirm the existence of the company''s workers. (4mks)

ii. Describe the analytical review techniques you would use in auditing the company''s wages (8mks)

QUESTION FIVE
Describe the audit procedures you would carry out to verify the following items appearing in the financial statements of a client:

a. Investment (4mks)
b. Loose tools (4mks)
c. Plant and machinery (4mks)
d. Trade marks (4mks)
e. Accounts receivable (4mks)

QUESTION SIX
a. Name and explain the types of qualifications that could be issued by an auditor in his audit report. (8mks)

b. Outline the consequences to a company of a qualified audit opinion (6mks)

c. State and briefly explain the opinion that an auditor would express in the following circumstances:
i. Where the directors of a client company do not provide for depreciation on plant and machinery because because the book value is greater than the amount reflected in the financial statements (2mks)

ii. Where the accounting records of a client company were destroyed by fire and the amount in the financial statements is an estimate (2mks)
iii. Where the auditor is unable to attend and witness the client''s annual stock take (2mks)

QUESTION SEVEN
a. State the measures that a company could put in place in order to prevent errors in the financial statements (6mks)

b. Summarise the possible indicators of the existence of irregularities in the financial statements of a client (6mks)

c. You are a member of the team auditing the financial statements of Salama Ltd. for the financial year ended 30 April 2009. During the course of your audit, you suspect that the company''s finance manager is authorizing payments to creditors for goods that were never supplied to the company.

Required:
Highlight the audit procedures you would adopt to detect the above fraud (8mks)

QUESTION EIGHT
a. Many organisations currently use computerized accounting systems based on a central server which it accesses through remote terminals (normally desktop computers) supported by a local area network (LAN) infrastructure.

Required:
Identify and explain the controls that should be put in place to prevent unauthorized access to such computer systems (12mks)

b. Outline the challenges experienced by an auditor when auditing computerized accounting systems (8mks)

Auditing And Assurance Question Paper

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