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Dac 401: Principles Of Auditing Question Paper

Dac 401: Principles Of Auditing

Course:Bachelor Of Commerce

Institution: University Of Nairobi question papers

Exam Year:2011

INSTRUCTIONS
1. Answer ALL Questions.
2. All Questions Carry EQUAL Marks.

QUESTION ONE
(a) Describe the historical shift in the audit profession's attitude towards the auditor's responsibilities regarding fraud. [10 marks]

(b) Discuss the following statement: 'Auditors perform extensive tests on a company's internal control system, in order to determine whether they can rely on that system in the course of their audit. Therefore, auditors can express an opinion on the adequacy of the audited company's internal control system.' [15 marks]

QUESTION TWO
(a) What are the Fundamental Principles an accountant must observe to achieve the objectives of the accounting profession according to the IFAC ethics guidelines? Briefly discuss them. [9 marks]

(b) Confidential client information may generally be disclosed only with the permission of the client. What are the exceptions to this rule? [8 marks]

(c) Can an accountant claim that the returns he prepares are always acceptable to the taxing authorities? Why? [8 marks]

QUESTION THREE
(a) Kolitar Corporation offers a unique service to telecommunication companies in South America. For a fee they will review the telecom's telephone transactions for calls from outside their country that might originate illegally from inside their country.

Required:
Use the FIVE elements exhibited by all assurance engagements to prove that Kolitar's work is an assurance engagement. [15 marks]

(b) Discuss the differences between assurance conclusions expressed in the positive {reasonable assurance} form, versus the negative {limited asdurance} form. Give examples of assurance engagements that generally use the positive form; and then examples that use the negative form. [10 marks]

QUESTION FOUR
(a) F.A. Bolch, an audit firm, has been asked to bid on an annual audit of the financial statements of Mammon, a publicly traded gold jewelry manufacturer. F.A. Bolch has been performing assurance services for Mammon over the past three years. Almost everyone on the audit team has investments in stocks and mutual funds. Mammon and F.A. Bolch had disputes in the past about the extent of assurance services provided. One of the members of the proposed audit staff was an employee of Mammon until 14 months ago. Only one person on the proposed audit team has audited a jewelry manufacturer.

Required:
(a) What procedures would F.A. Bolch conduct to determine independence of the firm and audit team? [6 marks]

(b) Does F.A. Bolch aidit team have the proper competencies? Explain. [5 marks]

(c) What circumstances might disqualify F.A. Bolch from serving as an auditor for Mammon? [6 marks]

(b) Patrick Mutua was recently appointed auditor of Waterfield Ltd., a public company. He had communicated with the company's previous auditor before accepting the audit. Mutua attended the company's shareholders meeting at which he was appointed but he has not yet visited the company's offices.

Required:
List the matters that Mutua should attend to between the time of his appointment and the commencement of his audit work in order to effectively plan the audit. [8 marks]

Dac 401: Principles Of Auditing Question Paper

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