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a) An expert or a specialist is a person possessing specialised skills, knowledge and experience in another field other than auditing and accounting. From his training and experience an auditor only has general knowledge on matters outside his profession and he is not expected to have the shills of a person trained or qualified to work in another profession. Consequently the auditor may need advice of other experts e.g. lawyers in arriving at the legal interpretation of legal cases against a client Situations Where The Auditor May Require Advice of an Expert
- Legal interpretation of contracts, laws and regulations
- Valuation of certain types of assets e.g. land and buildings, precious stones and minerals.
- In determining quantities and physical condition of assets e.g. underground minerals/quarries.
- Actuarial valuations;
- Measurement of work completed/to be completed in contracts
b) The extent to which the specialist should be independent
The auditor should evaluate the independence of the expert before relying on his work. If the expert is not independent of the client then there is a risk that the opinion given by the expert could be in the favour of the client. The auditor should therefore be on the look out for any factors that could impair the specialist‘s independence.
The risk of independence being impaired increases where the expert is employed by the client; in such cases he owes his loyalty to the client, or where he is related financially with the client.
c) The auditor should seek reasonable assurance that the expert‘s work constitutes appropriate audit evidence in support of the financial statements. The auditor should consider;
The skills and competence of the expert. The auditor should consider the expert‘s skills and competence in the particular profession. This is done by considering the expert‘s professional qualifications, license or membership of an appropriate professional body. The experience and reputation in the field in which the auditor is seeking evidence.
Wilfykil answered the question on February 21, 2019 at 08:57
- Most errors in computer based accounting systems can be traced to faulty input. Controls over the completeness and validity of all inputs are vital. Control...(Solved)
Most errors in computer based accounting systems can be traced to faulty input. Controls over the completeness and validity of all inputs are vital. Control over data conversions, controls over rejections and their correction and reprocessing, batch controls and computer edit controls affect both completeness and validity
Required:
a) Explain the controls that can be established over completeness of input.
b) What controls can be established over validity?
c) Programmed edit checks are probably the most familiar input controls and certainly the most effective. Give examples of these controls bringing out clearly:
i. The name of the edit control.
ii. Description of the control.
iii. The objective of the control.
Date posted: February 21, 2019. Answers (1)
- Your firm audits Clean Paints Ltd. and you are planning the audit of stock and work in progress for the year ended 31 December 2000....(Solved)
Your firm audits Clean Paints Ltd. and you are planning the audit of stock and work in progress for the year ended 31 December 2000. Clean Paints Ltd. determines the value of stock in its financial statements by the year -end stocktake. There is no perpetual Stock Inventory System though stock is counted quarterly for the purposes of management accounting
Stock and work in progress is held at the warehouse which is next to the company‘s factory.
Required:
a) State the areas that you will expect the client‘s stocktaking instructions to cover.
b) Describe the work you will perform and the matters you will record at the stock-take attendance.
Date posted: February 21, 2019. Answers (1)
- During the course of an audit, the auditor attempts to obtain sufficient relevant and reliable evidence to provide the satisfaction that the financial records are...(Solved)
During the course of an audit, the auditor attempts to obtain sufficient relevant and reliable evidence to provide the satisfaction that the financial records are completed and accurate. One of the ways that the auditor obtains satisfaction is to select representative samples of transactions and balances for detailed testing, such samples being made using either statistical of non-statistical methods.
Required:
a) Describe the main factors which influence the auditor in determining the size of the sample he will use for his detailed testing.
b) Describe three areas where the judgment will be exercised by the auditor when using statistical sampling.
Date posted: February 21, 2019. Answers (1)
- Write in point form an audit programme to cover salary and wages of a small size firm.(Solved)
Write in point form an audit programme to cover salary and wages of a small size firm.
Date posted: February 21, 2019. Answers (1)
- Define the term audit programme.(Solved)
Define the term audit programme.
Date posted: February 21, 2019. Answers (1)
- Write brief notes on the following auditing techniques:
i. Inspection;
ii. Observation;
iii. Enquiry.(Solved)
Write brief notes on the following auditing techniques:
i. Inspection;
ii. Observation;
iii. Enquiry.
Date posted: February 21, 2019. Answers (1)
- The matter listed below are always included in the internal control of a firm. You are required to explain the purpose of each of the...(Solved)
The matter listed below are always included in the internal control of a firm. You are required to explain the purpose of each of the items listed as (a), (b) and (c) below. Indicate the compliance tests you would carry out in order to ensure that the
intended controls were operating properly.
a) A requirement that mail is opened by two responsible employees who must promptly make listings of all receipts.
b) A rule that a fixed asset register must be maintained and updated promptly.
c) A requirement that a bank reconciliation statement is prepared on monthly basis.
Date posted: February 21, 2019. Answers (1)
- Working papers provide the audit evidence. They can be categorized into:
i. Auditors‘ prepared working papers.
ii. Client‘s schedules used as working papers.
iii. Audit programmes.
Working papers are...(Solved)
Working papers provide the audit evidence. They can be categorized into:
i. Auditors‘ prepared working papers.
ii. Client‘s schedules used as working papers.
iii. Audit programmes.
Working papers are then organized into files usually referred to as either current files of permanent files.
Required:
a) What details should each working paper which is prepared by an auditor indicate?
b) What details should each client schedule used as a working paper indicate?
c) What details should an audit programme indicate?
d) With appropriate illustrations, differentiate the use and contents of a permanent file from a current file and write brief notes on the evidence that is provided by working papers.
Date posted: February 21, 2019. Answers (1)
- Printa Limited is a large printing company, which has an on-line computer accounting system. The system is based around a central main frame computer, with...(Solved)
Printa Limited is a large printing company, which has an on-line computer accounting system. The system is based around a central main frame computer, with terminals serving individual departments. As part of the interim audit work, you have been asked to carry out a preliminary evaluation of ;
- The effectiveness of the computer controls over sales and debtors
Required:
Set out the points, which you would raise, in your preliminary evaluation of controls over sales and debtors
Date posted: February 21, 2019. Answers (1)
- It has often been said that the auditors‘ report is the formal result of all his efforts. This being the case, it is very important...(Solved)
It has often been said that the auditors‘ report is the formal result of all his efforts. This being the case, it is very important that the reader well understands the meaning of the Audit Report, particularly where the auditor wishes to qualify his opinion on the financial statements.
Required:
a) Under statutory provision, what are the main contents of the auditors‘ report?
b) Explain how the international standards on auditing attempt to ensure that the report of the auditors is clearly understood.
c) Describe clearly the circumstances in which an adverse opinion and a disclaimer of opinion would be appropriate and give two examples, one each, to illustrate your answer. (A full audit opinion is not required).
Date posted: February 21, 2019. Answers (1)
- The cashier of a firm who also acts a bookkeeper has been suspected of dishonesty. The books have not been audited for the last nine...(Solved)
The cashier of a firm who also acts a bookkeeper has been suspected of dishonesty. The books have not been audited for the last nine months. You have been asked to investigate the records to establish whether the cashier has committed a fraud
Required:
Outline how you would proceed with the investigation
Date posted: February 21, 2019. Answers (1)
- You are an audit senior in a firm of practicing accountants and your manager has gone out for an urgent meeting with a partner. Mr....(Solved)
You are an audit senior in a firm of practicing accountants and your manager has gone out for an urgent meeting with a partner. Mr. Charo, a manager with Charo and Company, a wholesale business has come to your office with a request that your firm becomes their auditors
Required:
a) Describe to Mr. Charo the legal, ethical and practical factors your firm would consider before accepting the appointment.
b) Explain to Mr. Charo the qualification and disqualification of an accounting firm under the provisions of the Companies Act to become auditors.
Date posted: February 21, 2019. Answers (1)
- Explain the following terms:
(a) Materiality;
(b) The duty of confidentiality;
(c) Professional indemnity insurance;
(d) Peer review;
(e) Quality Control(Solved)
Explain the following terms:
(a) Materiality;
(b) The duty of confidentiality;
(c) Professional indemnity insurance;
(d) Peer review;
(e) Quality Control
Date posted: February 21, 2019. Answers (1)
- Discuss the proposition that the =expectations gap‘ has arisen because of the public‘s ignorance and should therefore be resolved by the public themselves(Solved)
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Date posted: February 21, 2019. Answers (1)
- Why should the auditor be unwilling to take full responsibility for the detection of fraud during the annual audit? Explain.(Solved)
Why should the auditor be unwilling to take full responsibility for the detection of fraud during the annual audit? Explain.
Date posted: February 21, 2019. Answers (1)
- Does the auditor require a codified definition of ?reasonable care and skill or should this be left to professional judgment? Explain(Solved)
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Date posted: February 21, 2019. Answers (1)
- Do you believe that the auditors should be responsible to users other than the shareholders? Give reasons to support your answer.(Solved)
Do you believe that the auditors should be responsible to users other than the shareholders? Give reasons to support your answer.
Date posted: February 21, 2019. Answers (1)
- Explain how you would verify the following:
a) Investment income.
b) Bank balances.
c) Contingent liabilities.
d) Petty cash balances.(Solved)
Explain how you would verify the following:
a) Investment income.
b) Bank balances.
c) Contingent liabilities.
d) Petty cash balances.
Date posted: February 21, 2019. Answers (1)
- Explain the following controlling procedures in a well planned audit:
i. Direction and supervision of work.
ii. Review and co-ordinating of work.
iii. Quality controls(Solved)
Explain the following controlling procedures in a well planned audit:
i. Direction and supervision of work.
ii. Review and co-ordinating of work.
iii. Quality controls
Date posted: February 21, 2019. Answers (1)
- How does audit planning assist in the conduct of an audit?(Solved)
How does audit planning assist in the conduct of an audit?
Date posted: February 21, 2019. Answers (1)