The auditors distinguish their responsibilities from those of the directors in respect of the financial statements by including a statement of directors‘ responsibilities in the report.
Appropriate wording of this statement follows below: -
Company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the entity as at the end of the financial year and of the profit or loss of the entity for that year. In
preparing those financial statements, the directors are required to:
(i) Select suitable accounting policies and apply them consistently.
(ii) Make judgments and estimates that are reasonable and prudent.
(iii) State whether applicable accounting standards have been followed.
(iv) Prepare the financial statements on the gong concern basis unless it is inappropriate to presume that the entity will continue in business.
The directors are responsible for keeping proper accounting records which should disclose with reasonable accuracy at any time the financial position of the company and comply with the Company‘s Act and also take reasonable steps for the prevention and detection of fraud and other irregularities. They are also responsible for safeguarding the assets of the company
Auditors are required to form an opinion as to whether:-
- Proper accounting records have been kept by the company.
- Proper returns adequate for their audit have been received from branches not visited by them.
- The company‘s balance sheet and its profit and loss account are in agreement with the accounting records and returns
- Such information and explanations as auditors think necessary for the performance of their duties have been received from the company‘s officers
- The auditors report is consistent with the financial statements.
Wilfykil answered the question on February 22, 2019 at 06:03
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State the basic element of the scope paragraph of an audit report
(Solved)
State the basic element of the scope paragraph of an audit report
Date posted:
February 22, 2019
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Answers (1)
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Explain five factors which would indicate to the auditor that the going concern assumption of the business entity he is auditing is threatened
(Solved)
Explain five factors which would indicate to the auditor that the going concern assumption of the business entity he is auditing is threatened
Date posted:
February 21, 2019
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Answers (1)
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Many auditors now use laptops computers to perform various audit tasks. However, if audit
firms use laptop computers they risk data being corrupted and appropriate controls...
(Solved)
Many auditors now use laptops computers to perform various audit tasks. However, if audit firms use laptop computers they risk data being corrupted and appropriate controls must therefore be put in place to prevent the corruption of data.
a) Explain six ways which auditors can use laptop computers in their audit work (other than computer-assisted audit techniques).
b) Explain the computer assisted audit techniques listed below:
i. Embedded audit facilities.
ii. Integrated test facilities.
c) Briefly describe two types of software that might be used by auditors in their work other than Computer Assisted Audit techniques.
d) Describe the controls that auditors should implement when using laptop computers on audits.
Date posted:
February 21, 2019
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Answers (1)
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One of the responsibilities of the directors of a company is to establish strong internal controls to safeguard the assets of the firm.
(Solved)
One of the responsibilities of the directors of a company is to establish strong internal controls to safeguard the assets of the firm.
Required:
a) State the audit objectives of internal controls on fixed assets.
b) Set out the audit procedures you would follow to verify directors‘ fees.
c) What procedures would you apply to verify the extension of a building that has been constructed by the client during the year?
Date posted:
February 21, 2019
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Answers (1)
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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)