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Hbc 2214: Auditing1 Question Paper

Hbc 2214: Auditing1

Course:Bachelor Of Commerce

Institution: Dedan Kimathi University Of Technology question papers

Exam Year:2012

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DEDAN KIMATHI UNIVERSITY OF TECHNOLOGY UNIVERSITY EXAMINATIONS 2011/2012 THIRD YEAR FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE HBC 2214: AUDITING1 DATE: 16TH AUGUST 2012 TIME: 8.30 AM – 10.30 AM ================================================================== INSTRUCTIONS: Answer question ONE and any other TWO questions.
QUESTION ONE
a) Explain the following terms as used in Auditing; (8 marks) i) Vouching ii) Verification iii) Debtor Circularization iv) Bank Confirmation b) Discuss the stages an auditor is required to observe in undertaking an audit. (6marks) c) Explain the provisions of the Act regarding the resignation of an auditor (6marks) c) Explain clearly the four main types of qualified audit reports describing the circumstances leading to each type of report. (6marks) d) Distinguish between auditing and investigations (4marks)
QUESTION TWO
a) ‘An auditor is a watchdog, but not a bloodhound’. Discuss this statement based on the auditor’s duties, responsibilities and liability in an external audit function. (16 marks) b) Explain any four roles of a partner in an audit firm (4marks)
QUESTION THREE
You notice that it has become common practice among members of your class to board the University shuttle to town for a stroll after classes. On one of these tours, you meet your old friend Mr. Mwaolo who dropped out of school when both of you were in form three in secondary school. Mwaolo boasts to you of a successful retail shop that he operates in town. He tells you that he employs 10 assistants and further goes on to tell you that he is capable of offering you a better job when you complete your degree studies. You are not amused at the boast as it is still fresh in your mind how you beat him in class at secondary school. His business involves the buying of merchandise in cash on a daily basis. His sales are also in cash.
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Mr. Mwaolo also tells you that he has other businesses upcountry which he goes to supervise sometimes for days leaving his assistants to run the shop in town. He believes that his business organization in town is too small to warrant the design of any system of internal control. However, you manage to convince him that a system of internal control is necessary for the business organization and that you can design it. He therefore solicits your advice in this respect. Required: Demonstrate your knowledge of a system of internal control by advising him on relevant matters which include;
a) Discuss the main features of a sound internal control system. (7 marks)
b) Explain why an internal control system may be necessary in his shop (6 marks)
c) Explain the types of fraud which can be perpetuated by employees in retail shops
(3 marks) d) Discuss any four disadvantages of an internal control system. (4 marks)
QUESTION FOUR
a) Statistical sampling is better than judgmental sampling. Discuss. (10 marks)
b) The sufficiency of audit evidence is a function of sample size. Discuss the main considerations in determining sample size. (10marks)
QUESTION FIVE a) Compare and contrast auditing and accounting (6marks) b) Compare and contrast private and statutory audits (8marks) c) Define the term expectation gap (3marks) d) Discuss the auditor’s liability under the law of contract (3marks)

Hbc 2214: Auditing1 Question Paper

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