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Hps2105:Auditing Principles Question Paper
Hps2105:Auditing Principles
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2014
QUESITON ONE – (30 MARKS)
(a) You have recently come across the following professional issues (i) During the audit of a listed company on which you were involved, you overheard the finance director on the telephone to a family friend requesting him to buy shares on his behalf, prior to an announcement about a new product which you know is likely to increase the share price significantly. The finance director is a chartered accountant. (ii) During a night out at the pub following your exams one of your fellow students told you in strictest confidence that he had tampered with his degree certificate on his computer to improve the classification. He explained he had done this to satisfy the minimum requirements to secure a job at his firm, one of your main rivals. He boasted about how easy it was with new computer technology currently available. (iii) One of the audit clients you recently worked on his so impressed with your courtesy towards his staff members that he wanted to make you a gift of tickets to the world cup football final along with an overnight stay in a hotel.
Requirements
(a) Set out the problems inherent in each of the above situations and the action that you should take. (7 Marks)
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(b) Explain the importance of professional ethics in the provision of accountancy services. (5 Marks) (c) Enumerate the fundamental principles necessary for good professional auditors. (3Marks) (d) Highlight the rights of auditors in the performance of the audit function. (4 Marks) (e) Discuss the various users of audited financial statements. (5 Marks) (f) Give the purpose of letters of engagement in the conduct of the audit function. (6 Marks)
QUESTION TWO – (20 MARKS)
The auditor should obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the audit opinion (ISA, 500)
(a) Explain the concept of sufficient appropriate audit evidence. (2 Marks) (b) List the various kinds of evidence which might be available to an auditor, giving an illustration of each kind. (4 Marks) (c) Highlight the basic methods of obtaining audit evidence. (3 Marks) (d) Give reasons as to why a complete check of all the transactions and balances of a business is no longer required of an auditor. (6 Marks) (e) What should the auditor consider before relying on the work of an expert? (5 Marks)
QUESTION THREE – (20 MARKS)
In order to plan his work adequately the auditor need to understand the nature of the business his planning is a critical requirement in the audit function
(a) What are the advantages of good audit planning? (2 Marks) (b) Set out factors to consider when formulating the audit plan. (8 Marks) (c) Enumerate the various sources of information on the nature of client’s business. (6 Marks) (d) What are the problems encountered in developing and implementing audit plans. (4 Marks)
QUESTION FOUR – (20 MARKS)
(a) Discuss the advantages and disadvantages of accounting and auditing standards to auditors and the consequences of such standards having enforcement of government. (6 Marks) (b) Set out the need for preparing good working papers. (6 Marks)
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(c) Explain the benefits that are likely to accrue to a public limited company for being regularly audited both internally and externally. (3 Marks) (d) You have been appointed as the external auditor of a company where your mother is the company secretary and the uncle of your fiancée is the chairman. Would you accept the appointment? Elucidate. (5 Marks)
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