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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(a) Internal controls over non-current assets are designed to ensure the
orderly and efficient running of the business, adherence to management
policies, safeguarding of assets,...
(Solved)
(a) Internal controls over non-current assets are designed to ensure the
orderly and efficient running of the business, adherence to management
policies, safeguarding of assets, the prevention of fraud and error and
the completeness and accuracy of the accounting records.
Required:
List the internal controls that a small printing company with office
equipment, motor vehicles and plant and machinery should have in place
to achieve the objectives described above.
(b) Audit sampling is a technique for drawing conclusions about the
characteristics of a population by testing a sample drawn there from.
Internal and external auditors use it for both tests of controls, and
substantive testing.
Required:
Describe the following:
(i) Judgement sampling and statistical sampling;
(ii) A representative sample;
(iii) Tolerable error;
(iv) Two different methods of selecting a representative sample;
(v)The extrapolation of errors.
Date posted:
April 3, 2018
.
Answers (1)
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Your firm is the newly appointed external auditor to a large company that
sells, maintains and leases office equipment and furniture to its customers
and...
(Solved)
Your firm is the newly appointed external auditor to a large company that
sells, maintains and leases office equipment and furniture to its customers
and you have been asked to co-operate with internal audit to keep total
audit costs down. The company wants the external auditors to rely on
some of the work already performed by internal audit.
The internal auditors provide the following services to the company:
(i) A cyclical audit of the operation of internal controls in the company’s
major functions (operations, finance, customer support and
information services);
(ii) A review of the structure of internal controls in each major function
every four years;
(iii) An annual review of the effectiveness of measures put in place by
management to minimise the major risks facing the company.
During the current year, the company has gone through a major internal
restructuring in its information services function and the internal auditors
have been closely involved in the preparation of plans for restructuring,
and in the related post-implementation review.
Required:
a) Explain the extent to which your firm will seek to rely on the work of
the internal auditors in each of the areas noted above.
b) Describe the information your firm will seek from the internal auditors
in order for you to determine the extent of your reliance.
c) Describe the circumstances in which it would not be possible to rely on
the work of the internal auditors.
d) Explain why it will be necessary for your firm to perform its own work
in certain audit areas in addition to relying on the work performed by
internal audit.
Date posted:
April 3, 2018
.
Answers (1)
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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
.
Answers (1)
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(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)
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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)
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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 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)
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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)
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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...
(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)
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Distinguish between Accrual concept and Prudence concept
(Solved)
Distinguish between Accrual concept and Prudence concept.
Date posted:
March 23, 2018
.
Answers (1)
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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)
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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
.
Answers (1)
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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)
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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
.
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
.
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
.
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
.
Answers (1)
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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)
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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
.
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
.
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
.
Answers (1)