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Auditing And Assurance Question Paper

Auditing And Assurance

Course:Cpa Part Ii

Institution: Strathmore Business School question papers

Exam Year:2005

Answer any FIVE questions. All questions carry equal marks.

QUESTION ONE
a) Identify the potential users of audited financial statements. (7 marks)
b) What are the specific needs of the potential users of audited financial statements you have identified in (a) above? (7 marks)
c) An auditor is required to state whether, in his opinion proper books of account have been kept and whether the financial statements give a true and fair view of the state of the financial affairs of the company being audited.
What are the consequences, to the auditor, for giving an unqualified opinion, when he knows that there are material inaccuracies in financial statements? (6 marks)
(Total: 20 marks)

QUESTION TWO
One of the responsibilities of the directors of a company is to establish strong internal controls to safeguard the assets of the firm.

Required:
a) State the audit objectives of internal controls on fixed assets. (6 marks)
b) Set out the audit procedures you would follow to verify directors’ fees. (7 marks)
c) What procedures would you apply to verify the extension of a building that has been constructed by the client during the year? (7 marks)
(Total: 20 marks)

QUESTION THREE
Many auditors now use laptops computers to perform various audit tasks. However, if audit firms use laptop computers they risk data being corrupted and appropriate controls must therefore be put in place to prevent the corruption of data.

a) Explain six ways which auditors can use laptop computers in their audit work (other than computer-assisted audit techniques). (6 marks)
b) Explain the computer assisted audit techniques listed below:
i. Embedded audit facilities. (2 marks)
ii. Integrated test facilities. (2 marks)
c) Briefly describe two types of software that might be used by auditors in their work other than Computer Assisted Audit techniques. (4 marks)
d) Describe the controls that auditors should implement when using laptop computers on audits. (6 marks)
(Total: 20 marks)

QUESTION FOUR
a) List and briefly explain the general forms of qualifications available to the auditor in drafting his audit report, stating the circumstances in which each qualification is appropriate. Give an example of each circumstance. (8 marks)
b) List the principal matters, which the auditors considers in forming an opinion on the financial statements. (4 marks)
c) Outline the basic elements of an unqualified audit report. (8 marks)
(Total: 20 marks)

QUESTION FIVE
The auditor’s operational standard states, “The auditor should obtain relevant and reliable audit evidence sufficient to enable him to draw reasonable conclusions thereon”.

Required:
a) What factors would influence the judgment of the auditor with regard to sufficiency of audit evidence? (10 marks)
b) What factors would influence the auditor to accept third party certificates as audit evidence? (7 marks)
c) State the important factors that must be considered when assessing the reliability of audit evidence. (3 marks)
(Total: 20 marks)

QUESTION SIX
Control procedures consist of practices and procedures in addition to the control environment, established to achieve certain specific objectives. For each of the procedures listed below, explain the purpose of the control procedures and state the tests of control you would perform to confirm that the control objective was being achieved.

a) The preparation of a reconciliation statement. (4 marks)
b) The maintenance of a fixed assets register. (9 marks)
c) The existence of passwords in a micro-computer accounting system. (7 marks)
(Total: 20 marks)

QUESTION SEVEN
a) Give a definition of an “internal control system”. (4 marks)
b) Describe the internal control procedures you would recommend to the owner of a medium size wholesale business to facilitate prevention and detection of errors and frauds. (16 marks)
(Total: 20 marks)

QUESTION EIGHT
Inspection and monitoring of quality control by a firm of auditors involves both in-house and external procedures. The internal procedures include the post-audit review, sometimes known as a “cold review”. The external procedures are sometimes known as “external practice inspections” or “peer reviews”.

Required:
a) Write explanatory notes on the “cold-review”. (10 marks)
b) Explain the advantages and disadvantages of the “peer review”. (10 marks)
(Total: 20 marks)

Auditing And Assurance Question Paper

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