Auditing Question Paper

Auditing

Course:Cpa Part I

Institution: Orthodox Teachers Training College Of Africa question papers

Exam Year:2005

CPA PART I
AUDITING

Answer any FIVE questions.
ALL questions carry equal marks.

QUESTION ONE
a.
i. Briefly explain the meaning of the term "audit" (2mks)
ii. What are the objectives of an audit according to the Companies Act? (3mks)

b. List four advantages to a company having its accounts audited (4mks)

c. Identify and list the responsibilities of company directors in relation to the company''s accounting system (6mks)

d. List five limitations of an audit (5mks)

QUESTION TWO
The internal control system encompasses all the policies and procedures adopted by the management of an entity to assist it in achieving management objectives.

Required:
a. Identify and explain five management objectives that an internal control system can help management achieve (10mks)

b. List and briefly explain five control objectives that an internal control system over sales aims to achieve (5mks)

c. Explain what are the inherent limitations of an internal control system (5mks)

QUESTION THREE
a. Distinguish between a procedural audit and a balance sheet avid (8mks)

b. Explain the nature and purpose of a post audit review (4mks)

c. Identify the audit procedures which would need to be carried out in order to identify material post balance sheet events (8mks)

QUESTION FOUR
You have completed your audit of Tinga Tinga Ltd. You have issued a management letter to the Chief Accountant which identifies weaknesses in the controls over sales. Cash is recieved over the counter, from salesmen and also through the post. Tinga Tinga Ltd.''s Chief Accountant has asked you for recommendations as to the type of controls you would wish to see in operation in a sales system.

Required:
Outline the controls you would expect to find in Tinga Tinga Ltd.''s sales system with regard to:

a. Cash receipts by post (5mks)

b. Cash collected by salesman (5mks)

c. Cash sales within Tinga Tinga Ltd.''s premises (5mks)

d. Banking of cash recieved (5mks)

QUESTION FIVE
Audit working papers should always be sufficiently complete and detailed to enable an auditor with no previous connection with the audit to subsequently ascertain from them what work was performed and to support the conclusions reached by the auditor.

Required:
a. List four benefits that the auditor would obtain from working papers that meet the above requirements (4mks)

b. For each of the situations listed below, identify one form of audit evidence which is relevant and explain in each case whether that form of evidence is reliable and sufficient.
i. A trade debtor shown in the balance sheet (4mks)
ii. A batch of work-in-progress on the shop floor at the year end (4mks)
iii. A contingent liability disclosed in the notes to the accounts (4mks)

c. Briefly explain, giving two examples, the quality of audit evidence generated by third parties. (4mks)

QUESTION SIX
a. Differentiate between compliance testing and substantive testing (6mks)

b. Briefly explain the meaning of the following terms:
i. Teeming and lading (3mks)
ii. Audit trial (3mks)
iii. Capital commitment (3mks)

c. Explain how you would verify the figure for capital commitments disclosed in a note to the financial statements of your client. (5mks)

QUESTION SEVEN
a. Identify eight situations, where a sampling approach would be appropriate in the performance of an audit assignment (8mks)

b. Describe the following sample selection techniques briefly commenting on the relative merits and drawbacks of each:
i. Judgemental approach (4mks)
ii. Random selection approach (4mks)
iii. Systematic selection approach (4mks)

QUESTION EIGHT
a. Briefly explain the essential elements of the planning process of the audit of financial statements produced through computerised systems (12mks)

b. During the final audit of the books of account of a company, your are assigned to examine the director''s minute book.

Identify eight items you are likely to find in these minutes that would be of interest to you. (8mks)

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