a) The audit objectives of internal controls on fixed asset would be to ensure that the internal control objectives over fixed assets have been achieved. These objectives include:
i. Fixed assets are correctly recorded, adequately secured and properly maintained.
ii. Acquisitions and disposals of fixed assets are properly authorized.
iii. Acquisitions and disposals of fixed assets are for the most favourable price possible.
iv. Fixed assets are properly recorded, appropriately depreciated and written down where necessary.
v. Safeguard assets from misuse.
b) Audit procedures to verify directors‘ fees.
i) A schedule should be obtained from the client showing the make up of the directors‘ remuneration;
ii) The amounts paid in respect of each individual should be verified by reference to the company‘s accounting records and the service agreements or a board minute in respect of management remuneration or to the articles of association or annual general meeting minute in respect of fees for services as directors.
iii) The auditor should confirm that all directors‘ emoluments have been disclosed in the financial statements as required by the companies Act and have been appropriately taxed.
c) Verification of building extension
i. Ensure that proper authorisation was granted to build the extension (evidence by minutes of the board meeting) either by the board or a designated official. (Evidenced by his signature).
ii. Ensure that all the costs of the extension has been properly capitalized. This is of special importance where any of the directors or senior executives are enumerated by commission on profits, as the figure upon which commission is calculated will be inflated if revenue expenditure is incorrectly allocated to capital.
iii. Physically inspect the building to verify the physical existence of the extension.
iv. Examine documents of title to the building, to ensure that the building together with the extension rightfully belongs to the client.
v. Ensure that the cost of the extension has been properly determined (i.e. the extension is properly valued). To do this: -
a. Ensure the Company‘s system for allocating costs to the extension is appropriate. Such costs include cost of labour,
construction materials etc.
b. Ensure the costs included relate to the project by taking a sample of costs included and tracing back to costings and
source documentation.
Wilfykil answered the question on February 21, 2019 at 12:25
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Your client, ABC Ltd. has a system for inputting purchase and expense invoice where the operator inputs the following from each item.
(Solved)
Your client, ABC Ltd. has a system for inputting purchase and expense invoice where the operator inputs the following from each item.
-Order number (a code 2221 is used for items like electricity)
-Supplier name
-Supplier code number
-First four letters of nominal account name (entered on invoice by purchase department manager)
-Nominal account code (entered by purchase department manager) Date
-Goods inward note
-number Net amount
-VAT amount
-Gross amount
Required:
a) Suggest manual operation and controls which might previously have applied to these invoices.
b) Suggest input controls that might be applied by the program to these items.
c) List some audit tests that could be applied to these items indicating the purpose of each test and the relevant audit evidence obtained.
Date posted:
February 21, 2019
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Answers (1)
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List three disadvantages of using standardized audit programmes and how these disadvantages can be avoided.
(Solved)
List three disadvantages of using standardized audit programmes and how these disadvantages can be avoided.
Date posted:
February 21, 2019
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Answers (1)
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In the course of the audit of ABC Stationers Ltd. for the year ended 30 June 2001, you have noted and recorded in the audit...
(Solved)
In the course of the audit of ABC Stationers Ltd. for the year ended 30 June 2001, you have noted and recorded in the audit working papers, the following evidential matters:
1. Flowcharts of the company‘s payroll prepared by your audit assistant backed up by tests of controls.
2. An oral statement by the production director that the expected working life of plant acquired during the year is ten years.
3. A letter to the managing director from the company‘s bank manager indicating that the bank intends to extend overdraft facilities for a period of one year.
4. A list of items of inventory counted by a member of your audit team during observation of the company‘s annual stock count.
5. A letter from a customer to your firm in reply to a confirmation request indicating agreement with the balance recorded in the books of ABC Stationers Ltd.
Required:
a) With respect to each matter listed above, explain its relevance to the overall audit objective of forming an opinion and reporting on the financial statements.
b) Explain your judgment on the reliability of the audit evidence obtained in five ways listed above.
Date posted:
February 21, 2019
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Answers (1)
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Under what circumstances is one ineligible for appointment as an auditor of a company?
(Solved)
Under what circumstances is one ineligible for appointment as an auditor of a company?
Date posted:
February 21, 2019
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Answers (1)
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You have received a request form XYZ Ltd. to accept an appointment as their auditor for the financial year ending 31 December 2001
(Solved)
You have received a request form XYZ Ltd. to accept an appointment as their auditor for the financial year ending 31 December 2001
Required:
a) Explain the preliminary procedures you would carry out upon your appointment.
b) What is the importance of a preliminary review?
c) Why is it important for the auditor to hold discussions with the client‘s senior staff?
d) State why it is important for an incoming auditor to hold consultations with the outgoing auditor.
Date posted:
February 21, 2019
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Answers (1)
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You have been appointed the auditor of United Millers Company Limited, a medium manufacturing company which is quoted on the stock exchange.
(Solved)
You have been appointed the auditor of United Millers Company Limited, a medium manufacturing company which is quoted on the stock exchange.
Required:
a) List the important matters which must be included in the letter of engagement.
b) Explain the purpose of such a letter
Date posted:
February 21, 2019
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Answers (1)
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A company wishes to change from an old computerised system to a new computer based accounting system. Explain how and why both systems should run...
(Solved)
A company wishes to change from an old computerised system to a new computer based accounting system. Explain how and why both systems should run parallel prior to the change over the new system
Date posted:
February 21, 2019
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Answers (1)
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State six examples of controls to prevent unauthorised changes to data files that you would expect to find in a new computer based accounting system
(Solved)
State six examples of controls to prevent unauthorised changes to data files that you would expect to find in a new computer based accounting system
Date posted:
February 21, 2019
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Answers (1)
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In the context of a computer based accounting system, explain the meaning of the following terms:
i) Application controls
ii) General controls
(Solved)
In the context of a computer based accounting system, explain the meaning of the following terms:
i) Application controls
ii) General controls
Date posted:
February 21, 2019
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Answers (1)
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You have been asked by your firm to examine the payment vouchers of a company to establish the level of errors and then decide whether...
(Solved)
You have been asked by your firm to examine the payment vouchers of a company to establish the level of errors and then decide whether better results can be obtained through statistical techniques.
Required:
a) State the steps you would take in order to test the vouchers for the errors.
b) Why is it not satisfactory to pick vouchers from a limited period?
c) State under what circumstances statistical sampling is a good technique
Date posted:
February 21, 2019
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Answers (1)
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Outline the statutory provisions with regard to duties of external auditors
(Solved)
Outline the statutory provisions with regard to duties of external auditors
Date posted:
February 21, 2019
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Answers (1)
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Explain the value derived from the work of external auditors.
(Solved)
Explain the value derived from the work of external auditors.
Date posted:
February 21, 2019
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Answers (1)
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The director of one of your growing clients have decided to create an internal audit function in their organizational structure
(Solved)
The director of one of your growing clients have decided to create an internal audit function in their organizational structure
Required:
a) List and briefly describe the duties you would expect the internal audit staff to perform.
b) List and explain the criteria which you would consider before deciding to rely on the work of the internal audit function.
c) State the extent to which you, as an external auditor, can rely on the work of the internal audit function.
Date posted:
February 21, 2019
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Answers (1)
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Describe the various procedures of obtaining audit evidence giving an example of each by way of illustration.
(Solved)
Describe the various procedures of obtaining audit evidence giving an example of each by way of illustration.
Date posted:
February 21, 2019
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Answers (1)
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Explain the meaning of the "audit evidence"
(Solved)
Explain the meaning of the "audit evidence"
Date posted:
February 21, 2019
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Answers (1)
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List six examples of key control questions that would be suitable for inclusion in an ICEQ for a wages accounting system.
(Solved)
List six examples of key control questions that would be suitable for inclusion in an ICEQ for a wages accounting system.
Date posted:
February 21, 2019
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Answers (1)
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Explain how an Internal Control Evaluation Questionnaire (ICEQ) differs from an Internal Control Questionnaire (ICQ).
(Solved)
Explain how an Internal Control Evaluation Questionnaire (ICEQ) differs from an Internal Control Questionnaire (ICQ).
Date posted:
February 21, 2019
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Answers (1)
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Give four merits of using a flowchart to record an accounting system.
(Solved)
Give four merits of using a flowchart to record an accounting system.
Date posted:
February 21, 2019
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Answers (1)
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The auditing standard on subsequent events provide the basic principles and procedures as to the auditor‘s responsibilities and deal with:
i. Dating the auditor‘s report
ii. Audit...
(Solved)
The auditing standard on subsequent events provide the basic principles and procedures as to the auditor‘s responsibilities and deal with:
i. Dating the auditor‘s report
ii. Audit procedures
iii. Events after the date of the audit report.
Required:
a) In the context of subsequent events, what is the significance of the data of the auditor‘s report?
b) Outline the audit procedures considered necessary between the balance sheet date and the date of the auditor‘s report.
c) Summarise the appropriate actions of the auditor regarding events after the date of the audit report.
Date posted:
February 21, 2019
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Answers (1)
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Specialists or experts are occasionally required by external auditors mainly in connection with the valuation assets and the determination of liabilities.
(Solved)
Specialists or experts are occasionally required by external auditors mainly in connection with the valuation assets and the determination of liabilities.
Required:
a) The necessity for reliance on specialist.
b) The extent to which the specialist should be independent?
c) Competence of the specialist.
Date posted:
February 21, 2019
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Answers (1)