- If for any reason the auditor is unable to receive all the information and explanation he deems necessary for the purposes of his audit then there has been a limitation in the scope of his work. It means that the auditor is unable to conclude objectively because he is unable to obtain sufficient appropriate audit evidence
Effect of a limitation in scope on the auditor‘s opinion
- If the possible effect of a limitation on scope of an audit is material but not fundamental to the financial statements the auditor issues a qualified opinion (except for opinion) If the possible effect of a limitation on scope of an audit is of fundamental importance that the auditor is unable to express an opinion on the financial statements, the auditor issues a disclaimer of opinion as mentioned above.
- When there is a limitation on the scope of the auditor‘s work that requires the expression of a qualified opinion or disclaimer of opinion, the auditor should describe the nature of the limitation in his report and indicate the possible adjustments to the financial statements that might have been determined to be necessary, had the limitation not existed.
Wilfykil answered the question on February 22, 2019 at 07:43
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Explain the factors that external auditors should consider in determining whether the financial statements of a limited company show a true and fair view
(Solved)
Explain the factors that external auditors should consider in determining whether the financial statements of a limited company show a true and fair view
Date posted:
February 22, 2019
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Answers (1)
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Auditors may be liable to shareholders and other parties who may have relied on the financial statements upon which the auditors have expressed an opinion....
(Solved)
Auditors may be liable to shareholders and other parties who may have relied on the financial statements upon which the auditors have expressed an opinion. This is because the auditors are generally taken as owing a ―duty of care those parties and they
could be liable in the tort of negligence if they failed that duty.
Required:
(a) With reference to the external audit assignment, explain the meaning if the term ―duty of care
(b) Briefly explain the auditors‘ general responsibility. With regard to the prevention and detection of fraud and errors.
(c) State and briefly explain five possible measures that auditing firms should take in order to avoid legal actions for negligence against them.
Date posted:
February 22, 2019
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Answers (1)
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Identify four factors that should be taken into consideration by an audit firm when allocating staff to audit assignments
(Solved)
Identify four factors that should be taken into consideration by an audit firm when allocating staff to audit assignments
Date posted:
February 22, 2019
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Answers (1)
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List two advantages and two disadvantages of using standardised audit programmes during audit assignments
(Solved)
List two advantages and two disadvantages of using standardised audit programmes during audit assignments
Date posted:
February 22, 2019
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Answers (1)
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Briefly explain how an audit firm may use third party confirmations to provide evidence in relation to six difference balance sheet items
(Solved)
Briefly explain how an audit firm may use third party confirmations to provide evidence in relation to six difference balance sheet items
Date posted:
February 22, 2019
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Answers (1)
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List four advantages and four disadvantages of using the risk-based audit approach when auditing the financial statements of limited companies
(Solved)
List four advantages and four disadvantages of using the risk-based audit approach when auditing the financial statements of limited companies
Date posted:
February 22, 2019
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Answers (1)
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Identify the circumstances when it is appropriate to use only a substantive approach in an audit and when a combination of compliance and substantive tests...
(Solved)
Identify the circumstances when it is appropriate to use only a substantive approach in an audit and when a combination of compliance and substantive tests should be used
Date posted:
February 22, 2019
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Answers (1)
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State and briefly explain the action auditors should take if the management refuses to provide a letter of representation.
(Solved)
State and briefly explain the action auditors should take if the management refuses to provide a letter of representation.
Date posted:
February 22, 2019
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Answers (1)
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Identify the audit procedures which would need to be carried out in order to identify material post – balance sheet events.
(Solved)
Identify the audit procedures which would need to be carried out in order to identify material post – balance sheet events.
Date posted:
February 22, 2019
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Answers (1)
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Explain the nature and purpose of a post-audit review
(Solved)
Explain the nature and purpose of a post-audit review
Date posted:
February 22, 2019
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Answers (1)
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Distinguish between a procedural audit and a balance sheet audit
(Solved)
Distinguish between a procedural audit and a balance sheet audit
Date posted:
February 22, 2019
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Answers (1)
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Identify and list the responsibilities of company directors in relation to the company‘s
accounting system
(Solved)
Identify and list the responsibilities of company directors in relation to the company‘s
accounting system
Date posted:
February 22, 2019
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Answers (1)
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Explain how auditors distinguish their responsibility from those of the directors in respect of financial statements
(Solved)
Explain how auditors distinguish their responsibility from those of the directors in respect of financial statements
Date posted:
February 22, 2019
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Answers (1)
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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)