Before;
-He/she should consider professionally, legally and ethically qualifications to act as an auditor.
-He/she should staff with necessary technical competence to ensure identification of whether the firm’s resources are adequate to serve the needs of the new client.
-The next thing is that he should seek to know the status of the company and its management so as to predict potential risk in associating with this new client.
-This is then followed by communicating to present auditor which ensures inquiring reasons for the change of the auditor and acts as a detail of professional courtesy.
-This is then followed by request permission to communicate with the outgoing auditor.
-If this is denied he/she should deny the nomination.
After;
-He/she should determine the audit work scope.
-He/she should seek to obtain some background information of the nature of the client’s business.
-He/she should plan his/her audit.
-He/she should determine the level of reliance to be placed on the internal control system of the business.
-He/she should formulate the substantive tests to be carried out and plan the level of substantive testing in accordance to the requirements.
-He/she should carry out the final analytical review of the audit.
franco crick answered the question on April 12, 2018 at 15:06
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Why would a company not share all its profits to shareholders?
(Solved)
Why would a company not share all its profits to shareholders?
Date posted:
March 30, 2018
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(a) Explain why auditors carry out circularisation of debtors. (b) Distinguish between positive and negative debtors circularisation procedures. (c) Describe in...
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(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
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Answers (1)
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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...
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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
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Answers (1)
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(Solved)
Distinguish between Accrual concept and Prudence concept.
Date posted:
March 23, 2018
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Answers (1)
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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
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Answers (1)
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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
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Answers (1)
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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
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Answers (1)
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Distinguish between internal audit and internal check ...
(Solved)
Distinguish between internal audit and internal check
Date posted:
March 22, 2018
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Answers (1)
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What are the similarities between internal and external audits?
(Solved)
What are the similarities between internal and external audits?
Date posted:
March 22, 2018
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Answers (1)
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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
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Answers (1)
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Discuss the 4 main methods of determining depreciation
(Solved)
Discuss the 4 main methods of determining depreciation.
Date posted:
March 22, 2018
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Answers (1)
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(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
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Answers (1)
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“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
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Answers (1)
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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
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Answers (1)
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The principle objective of the verification of liabilities, commitments and contingencies is to form an opinion as to their completeness, existence, valuation and presentation in...
(Solved)
The principle objective of the verification of liabilities, commitments and contingencies is to form an opinion as to their completeness, existence, valuation and presentation in the financial statements.
Required:
a. Why does the auditor examine statements received from suppliers of goods and services?
b. How would the auditor ensure that at the year end all goods received by a client were included in both inventories and creditor balances?
c. How would the auditor ensure that the amounts accrued for wages and salaries due but unpaid were properly calculated and recorded in the books?
d. What tests would the auditor need to undertake in order to ensure that capital commitments at the year end were fairly stated in the books?
Date posted:
March 16, 2018
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Answers (1)
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The auditing guideline on ‘planning, controlling and recording’ contains the following statement with regard to working papers: ‘audit working papers should always be sufficiently complete...
(Solved)
The auditing guideline on ‘planning, controlling and recording’ contains the following statement with regard to working papers: ‘audit working papers should always be sufficiently complete and detailed to enable an experience auditor with no previous connection with the audit subsequently to ascertain from them what work was performed and to support the conclusions reached.’
Required:
a) Describe four benefits that the auditor will obtain from working papers that meet the above requirement.
b) If the auditor has discovered that a claim for damages is a significant item requiring exercise of judgement in the financial statements, show what type of evidence on the matter the auditor must record in the current file. Give reasons for the inclusion of such evidence in the current file.
c) List three types of information which is normally retained in the audit file and state why such information should be available for reference in the course of an audit.
d) Comment on the desirability of using standardised working papers and give an example of such working paper and its use.
Date posted:
March 16, 2018
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Answers (1)
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Advantages of maintaining control accounts
(Solved)
Advantages of maintaining control accounts.
Date posted:
March 16, 2018
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Answers (1)
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a. Briefly explain two practical circumstances when the auditor may be liable for damages arising from material misstatements in published financial statements on which the auditors...
(Solved)
a. Briefly explain two practical circumstances when the auditor may be liable for damages arising from material misstatements in published financial statements on which the auditors have expressed an audit opinion.
b. List the classes of persons who may make a successful legal action against the auditors negligence.
c. Explain how an audit firm can minimise its potential legal liability for professional negligence.
Date posted:
March 14, 2018
.
Answers (1)
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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 scrutinising the replies tothedebtors circularisation and in confirming whether the debtors balances are collectable in the following situations:
• Where the debtor does not agree with the balance and states a difference;
• Where the debtor reports that he cannot confirm the balance;
• Where no reply is received from the debtor
Date posted:
March 14, 2018
.
Answers (1)
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a) Describe the reasons for maintaining proper audit working papers.
b) The documents, records and related information listed below are normally maintained in ‘permanent’ audit...
(Solved)
a) Describe the reasons for maintaining proper audit working papers.
b) The documents, records and related information listed below are normally maintained in ‘permanent’ audit file.
In each case indicate the importance of maintaining the respective document, record and
information.
• Memorandum and articles of association:
• Principal activities and locations;
• Specific legislation and regulations
• History including summary of results;
• Key staff;
• Description of accounting systems and internal control
• Organisation charts;
• Copy of letter of engagement
Date posted:
March 14, 2018
.
Answers (1)