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Auditing Question Paper

Auditing

Course:Cpa Part I

Institution: Orbit School Of Management Studies question papers

Exam Year:2006

QUESTION ONE
a.
i. Identify and explain the quality control procedures that a firm should implement to ensure its audit assignments are completed efficiently (8mks)

ii. Highlight the matters taken into consideration to assess the quality of audit work during an independent review (6mks)

b
i. Define the term ''audit programme'' (2mks)

ii. List the disadvantages to an audit firm of using a standardised audit programme in its assignments (4mks)

QUESTION TWO
a. Your audit firm, Kinoti and Associates (Certified Public Accountants) has scheduled a meeting with the directors of Safiner Solutions Ltd. with regard to the firm''s appointment as the company''s auditor. The items listed for discussion during the meeting include:

1. Appointment of an auditor under the Companies Act
2. Remuneration of an auditor under the Companies Act

Prepare brief notes explaining each of the above items. (10mks)

b. In addition to performing audits, an audit firm can also perform other services to its clients.
List the advantages and disadvantages of an audit firm offering other services to its clients (5mks)

c. Identify the matters an auditor would consider when evaluating a client firm''s integrity (5mks)

QUESTION THREE
a. The preparation of financial statements is the responsibility of a company''s directors.
List and explain the assertions made by the directors of a company pertaining to the accounts payable appearing in the balance sheet (7mks)

b. Audit evidence refers to any information used by the auditor to enable him arrive at a reasonable conclusion necessary for his audit opinion

i. List the factors that influence the auditor''s judgement on the sufficiency of audit evidence (5mks)
ii. Identify the presumptions used by an auditor in assessing the reliability of audit evidence (5mks)
iii. Highlight the auditor''s limitations in the collection of audit evidence (3mks)

QUESTION FOUR
a. XYZ Ltd. is a company quoted on the stock exchange. In order to finance its expansion plans, the company raised capital through a new issue of shares during the year ending 30 June 2006. You have been assigned the responsibility of auditing the company''s share capital for the year ending 30 June 2006.

Required:
i. Describe the audit procedures you would perform in verifying the new issue of shares (8mks)
ii. Outline the audit work you would carry out if the company had not issued new shares during the year ending 30 June 2006 (4mks)

b.
i. State how an organisation should account for a contige liability in its financial statements (3mks)
ii. Explain how an auditor verifies the existence of a contige liability in the course of his audit work (5mks)

QUESTION FIVE
a. In the context of International Standard on Auditing (ISA) 700 (The Auditor''s Report on Financial Statements):
i. Explain the basis of an auditor''s opinion in the audit report (5mks)
ii. Identify the matters in a company''s accounts that may lead to a qualified audit report (7mks)

b. The directors of a company should carefully consider whether the going concern basis is appropriate in the preparation of financial statements.
Summarise the considerations that the directors of a small retail company would take into account when reviewing the going concern basis (8mks)

QUESTION SIX
a. The presence of fraud in corporate collapse often results in litigation against the auditors involved.

Required:
i. Explain the reasons why fraud poses a threat to auditors (6mks)
ii. List the possible indications of the existence of fraud in a client company. (4mks)

b. Describe the audit procedures an auditor would adopt if he suspects that the following types of fraud have been perpetrated by the client:
i. Payments for fictious procurements (5mks)
ii. The existence of dummy employees on the payroll (5mks)

QUESTION SEVEN
a. When auditing in an electronic data processing environment, it is necessary for the auditor to employ computer assisted audit techniques.
i. Define the term ''test packs'' (2mks)
ii. Describe how an auditor utilises a test pack in examining a client''s computerised fixed asset register (8mks)

b. Outline the benefits to an auditor of automating his audit working papers (4mks)

c. Identify the controls which should be instituted by a client in an online system (6mks)

Auditing Question Paper

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