Get premium membership and access questions with answers, video lessons as well as revision papers.
Companies do not share all their profits to shareholders because they also need money to cater for unexpected expenses that may come up during a financial year as well as to have funds for use in projects that lead to the growth of the company.
Racheal01 answered the question on April 2, 2018 at 10:40
- You are auditing the financial statements of Newbridge Trading plc, for the year-ended 31 October 1997.
The senior partner of your audit firm has...(Solved)
You are auditing the financial statements of Newbridge Trading plc, for the year-ended 31 October 1997.
The senior partner of your audit firm has asked you to consider the auditor‟s responsiresponsibilities for identifying subsequent events. Also, he has asked you to describe the audit procedures, which examine subsequent events. He has suggested that an example of one point in answer to part (b) below would be:
„Checking sales ledger cash received after the year-end to determine the realisability of debtors at the year-end and highlight doubtful debts.‟
The detailed audit work was completed on Friday 5 December 1997. It is proposed that:
a) The audit report will be signed on Friday 19 December;
b) The financial statements will be sent to shareholders on Monday 5 January 1998; and
c) The company‟s annual general meeting will be held on Wednesday 28 January 1998.
Required:
a) Consider the auditor‟s responsibilities for detecting material subsequent events in the periods:
i) 31 October to 5 December 1997 ii) 5 December to 19 December 1997 iii) 19 December 1997 to 5 January 1998
iv) 5 January 1998 to 28 January 1998
v) After 28 January 1998
b) List and briefly explain audit procedures, which involve examination of subsequent events.
c) Describe the audit work you will carry out in period (a) (ii) above.
Date posted: March 28, 2018. Answers (1)
- (a) What is meant by the term "fraud"? Give four examples of fraudulent activities.(Solved)
(a) What is meant by the term "fraud"? Give four examples of fraudulent activities.
(b) What do you consider to be the auditor?s responsibilities in the course of
the normal annual audit in relation to the detection of fraud?
(c) Explain the way in which the auditor should approach and perform his work in order to meet these responsibilities.
Date posted: March 28, 2018. Answers (1)
- Emali Co. Ltd. has undergone a period of substantial growth following its establishment five years ago. At the last annual general meeting Smith &...(Solved)
Emali Co. Ltd. has undergone a period of substantial growth following its establishment five years ago. At the last annual general meeting Smith & Co. Associates, a tow-partner firm of Certified Public Accountants were re-appointed as auditors. However, Smith & Co. Associates have decided that they do not have the necessary resources to audit the enlarge company.
Required:
a) Briefly, explain how Smith & Co. Associates may resign from its appointment before the next annual general meting.
b) How any a casual vacancy arising from the resignation of present auditors be filled and what procedures are necessary before the company‟s next annual general meeting at which the appointment will be presented for ratification?
c) Outline the steps the prospective auditor must take before deciding whether or not to accept the nomination as an auditor.
Date posted: March 28, 2018. Answers (1)
- (a) Explain why auditors carry out circularisation of debtors. (b) Distinguish between positive and negative debtors circularisation procedures. (c) Describe in...(Solved)
(a) Explain why auditors carry out circularisation of debtors.
(b) Distinguish between „positive? and „negative? debtors circularisation procedures.
(c) Describe in detail the work you would carry out in scrutinizing the replies to the debtors circularisation and in confirming whether the debtors balances are collectable in the following situations:
i. where the debtor does not agree with the balance and states a difference; (6 marks)
ii. where the debtor reports that he cannot confirm the balance
iii. where no reply is received from the debtor
Date posted: March 28, 2018. Answers (1)
- You have been asked by the partners of your firm to prepare a draft memorandum on materiality which will provide guidance to members of...(Solved)
You have been asked by the partners of your firm to prepare a draft memorandum on materiality which will provide guidance to members of staff in conducting the audit of the accounts of limited companies.
Required:
a)Define materiality.
b) Explain the importance of this concept to the auditor.
c) Suggest some criteria for determining cut-off point in order to assess the materiality of an error.
Date posted: March 28, 2018. Answers (1)
- John Mutiso bought shares of Sh.2 million six months ago in Kenya Company Limited which has since gone into liquidation. He intends to sue...(Solved)
John Mutiso bought shares of Sh.2 million six months ago in Kenya Company Limited which has since gone into liquidation. He intends to sue XYZ & Co. Certified Public Accountants for the imminent loss of Sh. 2 million which he is likely to suffer. XYZ & Co. had audited the Kenya Company Ltd. The previous year and issued an unqualified report. John Mutiso claims that he solely relied on the audit report when he took that investment decision.
Required:
a) Do the auditors, XYZ & Co. have any liability to Mr. John Mutiso?
b) What circumstances must Mr. John Mutiso demonstrate if he has to succeed against the auditors?
c) State the measures XYZ & Co. should undertake to minimize potential liability for professional negligence.
Date posted: March 28, 2018. Answers (1)
- Distinguish between Accrual concept and Prudence concept(Solved)
Distinguish between Accrual concept and Prudence concept.
Date posted: March 23, 2018. Answers (1)
- Explain the following concepts a).Depreciationb) Amortizationc) Depletion(Solved)
Explain the following
a) Depreciation
b) Amortization
c) Depletion
Date posted: March 23, 2018. Answers (1)
- The auditing guideline on ‘recording’ requires audit working papers to be sufficient complete and detailed so that an experienced auditor who has no previous connection...(Solved)
The auditing guideline on ‘recording’ requires audit working papers to be sufficient complete and detailed so that an experienced auditor who has no previous connection with the audit is able to subsequently ascertain from working papers the work performed and to further support the conclusions reached thereon.
Required:
(a) State four benefits that the auditor will obtain from the working papers that meet the above requirements.
(b) Outline the contents of a typical:
(i) Current audit file;
(ii) Permanent audit file.
Date posted: March 22, 2018. Answers (1)
- You are the audit manager in charge of Car Alarms Ltd. Whose financial year ended on 31 March 1993. Due to the tight schedule...(Solved)
You are the audit manager in charge of Car Alarms Ltd. Whose financial year ended on 31 March 1993. Due to the tight schedule of your programmes you are unable to devote anytime at the client‟s premises. Therefore you have delegated the responsibility to the audit senior.
(a) State the procedures you would follow to control the audit up to completion stage.
(b) Explain the matters you would pay attention to in order to achieve you firm‟s quality control targets.
Date posted: March 22, 2018. Answers (1)
- Give four examples of internal audit work that may be used by the external auditor (Solved)
Give four examples of internal audit work that may be used by the external auditor
Date posted: March 22, 2018. Answers (1)
- Explain the matters you would consider and the work you would perform to enable you assess the extent to which you would rely on the...(Solved)
Explain the matters you would consider and the work you would perform to enable you assess the extent to which you would rely on the work of the internal audit department of your client
Date posted: March 22, 2018. Answers (1)
- Distinguish between internal audit and internal check ...(Solved)
Distinguish between internal audit and internal check
Date posted: March 22, 2018. Answers (1)
- What are the similarities between internal and external audits? (Solved)
What are the similarities between internal and external audits?
Date posted: March 22, 2018. Answers (1)
- Describe the following types of Audits:
i. Statutory Audits;
ii. Internal Audits;
iii. Private Audits;
iv. Management Audits;
(Solved)
Describe the following types of Audits:
i. Statutory Audits;
ii. Internal Audits;
iii. Private Audits;
iv. Management Audits;
Date posted: March 22, 2018. Answers (1)
- In addition to shareholders, many different parties are interested in the audited accounts of a company. Name FOUR such parties and state the significance...(Solved)
In addition to shareholders, many different parties are interested in the audited accounts of a company. Name FOUR such parties and state the significance of audited accounts to each one of them.
Date posted: March 22, 2018. Answers (1)
- Discuss the 4 main methods of determining depreciation(Solved)
Discuss the 4 main methods of determining depreciation.
Date posted: March 22, 2018. Answers (1)
- (a) Define control accounts (b) State the two main types of control accounts (c) State the purpose of control account(Solved)
(a) Define control accounts (b) State the two main types of control accounts (c) State the purpose of control account
Date posted: March 21, 2018. Answers (1)
- “Action must be specifically taken to prevent the occurrence of frauds involving the assets of the company”, Finance Director of Food All Limited addressing accounting...(Solved)
“Action must be specifically taken to prevent the occurrence of frauds involving the assets of the company”, Finance Director of Food All Limited addressing accounting staff of the company. Of particular interest to the directors are:
1. The safety of unclaimed wages
2. The receipt of cash from customers.
3. The company’s cheque books
4. Issue of credit notes to debtors.
Required:
a. For each of the above, explain how a fraud can occur in the area.
b. What controls should be in place to prevent the occurrence of each of the frauds described in (a) above?
Date posted: March 16, 2018. Answers (1)
- The Companies Act (Cap.486) sets out the duties of the auditors for a company in respect of his report and other matters.
Required:
a. State four situations under...(Solved)
The Companies Act (Cap.486) sets out the duties of the auditors for a company in respect of his report and other matters.
Required:
a. State four situations under which the Act requires auditors to qualify their report.
b. State two circumstances in which the auditors may qualify their report owing to inherent uncertainty.
c. State four types of circumstances in which the auditors may qualify their report as a result of disagreement with the directors
Date posted: March 16, 2018. Answers (1)