a) 1) Importance of an auditor obtaining confirmations from the client's bank
• Assist in reducing audit risk for the related assertions made by management in the
financial statements e.g. occurrence, valuation etc.
• Forms corroborating information obtained from a source independent from the entity
which increases the assurance the auditor obtains from management representations made
on matters relating to the clients financial statements.
• External confirmation is likely to provide strong evidence to support the existence, the
rights and obligations of items in the financial statement.
• It provides the useful information to be used in the reconciliations to be made.
• It provides information on the clients assets held as security and liabilities attached and
ownership.
• It provides information on the genuineness of the balances as at the balance sheet date.
• It is used to test the cut-off procedure of bank balances as at the balance sheet date.
• Confirmation also provides evidence regarding to operation of-cut-off procedures.
ii) Steps followed when confirming balances from the bank;
• The auditor should write to the management-or client to obtain authority to communicate
with the client's bank. It will enable the bank to disclose the necessary information.
• The auditor should determine the details of information obtained.
• He should send a bank letter in a standard format to be received by the bank in good time
of at least two weeks to the yearend attaching the authority granted to obtain information.
• Where additional information is needed, the auditor should draft a separate letter
requesting for information.
• When confirmation is received from the bank, the auditor should check that the bank has
answered all the questions from the letter.
• The auditor should make a follow up of a point not disclosed in the bank letter to assess
the completeness.
b) Audit procedures an auditor could carry out when verifying a client's bank
reconciliation.
• Obtain analysis of cash balances and reconcile them to the general ledger. The primary
objective is to ascertain clerical accuracy of bank reconciliations.
• To select standard confirmation forms to financial institutions to verify amounts on
deposits.
• Obtain or prepare reconciliation of bank accounts as at the balance sheet date and
consider the need to reconcile bank activity for additional months
• Obtain a cut off bank statement containing transactions of at least seven business days
subsequent to balance sheet date
• Count and list the cash in hand.
• Verify the client cut off of cash receipts-and cash disbursements
• Analyze bank transfer for last week of audit year and first week of the following year to
verify the completeness
• Investigate any cheques representing large or unusual -amounts to related parties, e.g.
audit company to subsidiary company.
• Trace the outstanding cheques from the bank reconciliation to the cash book before the
year end and date alter the bank statement is issued.
• Determine if the hank accounts have any restrictions e.g. if used as security to
borrowings, or fixed -deposits.
• Evaluate proper financial statements, presentation and disclosure-of cash.
• Asses the standing orders that require adjustments.
• Check on the short banking's and over banking's.
Kavungya answered the question on May 14, 2019 at 14:06
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"An auditor i:., required to use assertions for classes of transactions, account balances and
presentation and disclosure in sufficient detail in order to form a basis...
(Solved)
"An auditor i:., required to use assertions for classes of transactions, account balances and
presentation and disclosure in sufficient detail in order to form a basis for the assessment of risks
of material .misstatement and the design:and performance of further audit-procedures"'.
Required:
Identify the assertions used by auditors in the following categories:
i. Assertions about account balances at the period end
ii. Assertions about presentation and disclosure.
Date posted:
May 14, 2019
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Answers (1)
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Summarise the audit work you would undertake to obtain reasonable assurance that the
following items appearing the Statement of financial position of a client are not...
(Solved)
Summarise the audit work you would undertake to obtain reasonable assurance that the
following items appearing the Statement of financial position of a client are not materially
misstated:
i. Specific allowance for doubtful debts.
ii. Trade payables.
Date posted:
May 14, 2019
.
Answers (1)
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Explain how an auditor would carry out the verification of cash at bank.
(Solved)
Explain how an auditor would carry out the verification of cash at bank.
Date posted:
May 14, 2019
.
Answers (1)
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For each of the following items in the financial statements, identify five forma of third party
evidence that the auditor would rely on.
i. Land
ii. Rent expenses
iii....
(Solved)
For each of the following items in the financial statements, identify hvo.forins of third party
evidence that the auditor would rely on.
i. Land
ii. Rent expenses
iii. Motor vehicles
Date posted:
May 14, 2019
.
Answers (1)
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a) Argue the case for carrying out risk analysis during an audit
b) Describe eight procedures for audit of inventory
(Solved)
a) Argue the case for carrying out risk analysis during an audit
b) Describe eight procedures for audit of inventory
Date posted:
May 14, 2019
.
Answers (1)
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a) List four audit .procedures you would perform on credit notes issued to customers upon
return of goods
b) Explain why it is important for an auditor...
(Solved)
a) List four audit .procedures you would perform on credit notes issued to customers upon
return of goods
b) Explain why it is important for an auditor to send a bank letter to his client's bank.
c) Summarize any six procedures that are undertaken by an auditor while obtaining
confirmation from a client's bank.
Date posted:
May 14, 2019
.
Answers (1)
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Briefly explain the following terms.
i) Analytical procedures
ii) Audit opinion.
iii) Audit working papers
(Solved)
Briefly explain the following terms.
i) Analytical procedures
ii) Audit opinion.
iii) Audit working papers
Date posted:
May 14, 2019
.
Answers (1)
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a. List eight factors that an auditor should take into consideration when determining the size
of an audit sample.
b) Citing two examples in each case, describe...
(Solved)
a. List eight factors that an auditor should take into consideration when determining the size
of an audit sample.
b) Citing two examples in each case, describe the quality of the following types of audit
evidence:
(i) Evidence originated by the auditor.
(ii) Evidence created by third parties.
(iii) Evidence created by the management of the client.
Date posted:
May 14, 2019
.
Answers (1)
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a) Explain the importance of the going concern assumption in the preparation of the annual
financial statements of entities.
b) List four statutory, books that would be...
(Solved)
a) Explain the importance of the going concern assumption in the preparation of the annual
financial statements of entities.
b) List four statutory, books that would be of interest to the auditor.
c) Describe the substantive procedures the auditor would apply to the following records:
i. The accounting records
ii. The company's minute book
Date posted:
May 14, 2019
.
Answers (1)
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Describe the general considerations which the auditors must bear in mind when evaluating audit
evidence.
(Solved)
Describe the general considerations which the auditors must bear in mind when evaluating audit
evidence.
Date posted:
May 14, 2019
.
Answers (1)
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a) Briefly describe the audit tests you would carry out to verify trade accounts receivable
at the year end.
b) Describe the audit work you would carry...
(Solved)
a) Briefly describe the audit tests you would carry out to verify trade accounts receivable
at the year end.
b) Describe the audit work you would carry out on the following replies to a receivables
circularisation:
(i) Balance agreed by the customer.
(ii) Balance not agreed by customer.
(iii) Customer does not reply to the confirmation letter.
Date posted:
May 14, 2019
.
Answers (1)
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Describe how you would vouch a loan to an employee of Sh. 100,000 shown in the account of a
client.
(Solved)
Describe how you would vouch a loan to an employee of Sh. 100,000 shown in the account of a
client.
Date posted:
May 14, 2019
.
Answers (1)
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Justify the use of previous year's financial statements while carrying out an audit assignment.
(Solved)
Justify the use of previous year's financial statements while carrying out an audit assignment.
Date posted:
May 14, 2019
.
Answers (1)
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Explain five benefits of an asset register to the auditor.
(Solved)
Explain five benefits of an asset register to the auditor.
Date posted:
May 14, 2019
.
Answers (1)
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Discuss five assertions that an auditor should consider during the conduct of substantive
procedures in an audit
(Solved)
Discuss five assertions that an auditor should consider during the conduct of substantive
procedures in an audit
Date posted:
May 14, 2019
.
Answers (1)
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a) Outline six stages of an accounts receivable circularization
b) ISA 500 'Audit Evidence-Revised' provides the methods which the auditor could use
while collecting audit evidence. Using...
(Solved)
a) Outline six stages of an accounts receivable circularization
b) ISA 500 'Audit Evidence-Revised' provides the methods which the auditor could use
while collecting audit evidence. Using relevant examples, examine seven methods of
collecting audit evidence
Date posted:
May 14, 2019
.
Answers (1)
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a) List four reasons for preparing audit working papers
b) Identify four types of information you would expect to -find in the following:-
i. Permanent audit file
ii....
(Solved)
a) List four reasons for preparing audit working papers
b) Identify four types of information you would expect to -find in the following:-
i. Permanent audit file
ii. Current audit file
Date posted:
May 14, 2019
.
Answers (1)
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The appropriateness of audit evidence is concerned with relevance and reliability
Required;-
Explain any three considerations that an auditor uses to assess the reliability of any piece...
(Solved)
The appropriateness of audit evidence is concerned with relevance and reliability
Required;-
Explain any three considerations that an auditor uses to assess the reliability of any piece of audit
evidence
Date posted:
May 14, 2019
.
Answers (1)
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a) Explain six limitations of gathering audit evidence.
b) Summarise three considerations that must be made for the external auditor to rely on the
work of the...
(Solved)
a) Explain six limitations of gathering audit evidence.
b) Summarise three considerations that must be made for the external auditor to rely on the
work of the internal auditor.
c) In view of the financial reporting framework, explain five considerations that the auditor
should make when forming an opinion.
Date posted:
May 14, 2019
.
Answers (1)
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a) Standardisation of working papers refers to a predetermined Format of presenting and
documenting audit findings.
With reference to the above statement, discuss three advantages and three...
(Solved)
a) Standardisation of working papers refers to a predetermined Format of presenting and
documenting audit findings.
With reference to the above statement, discuss three advantages and three disadvantages
of standardized working papers.
b) Explain Four factors that could influence the acceptance of evidence obtained from a
third party.
Date posted:
May 14, 2019
.
Answers (1)