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Hbc2112:Principles Of Auditing Question Paper
Hbc2112:Principles Of Auditing
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2014
QUESTION ONE – (30 MARKS)
Ken Munene is a managing partner of ROMU enterprises, where Rose Kajuju and Ken are business partners for purposes of sharing profits. The business is located in Meru Town. Rose is a career Diplomat working at Arusha and has entrusted all business affairs and transactions of ROMU enterprises to Ken.
Ken has an elementary knowledge of accounting though his main training is in marketing. He has been advised by his bank that ROMU annual accounts and financial statements should be independently audited by a Certified Public Accountant (CPA), though he has been preparing ROMU books and financial statements and does not appreciate nor understand why accounts and financial statements should be appraised by a CPA who is independent of the business management.
Required:
(a) Distinguish clearly the differences between auditing and accounting. (4 marks)
(b) Discuss the benefits that would accrue to ROMU enterprise for being audited regularly by an independent auditor, CPA, licensed and practicing. (8 marks)
(c) Distinguish between final audit and continuous audit, highlighting any similarity common in the two forms of audits. (6 marks)
(d) Describe four ways in which regular independent audits may be beneficial to Rose Kajuju as a partner. (4 marks)
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(e) Explain the requirements for appointment of auditors and the qualities of good accountants(auditors) (8 marks)
QUESTION TWO – (20 MARKS)
(a) Distinguish between errors and frauds. (4 marks)
(b) Discuss the essentials of a good internal control system. (8 marks
(c) Explain the limitations of internal controls. (5 marks)
(d) Elucidate clearly why there is need for auditing in the public sector. (3 marks)
QUESTION THREE – (20 MARKS)
(a) Discuss the rights exercised by an auditor while carrying out the audit function. ( 8 marks)
(b) Explain clearly why the auditor’s independence is important in an audit assignment. (6 marks)
(c) Explain principal matters that auditors should consider in forming an opinion on financial statements. (6 marks)
QUESTION FOUR – (20 MARKS)
a) Recently, you have secured yourself a practical attachment with the Meru Dairy Farmers Sacco audit section. The entity sells milk and associated products to supermarkets, schools and colleges within Meru County. Your industrial Audit supervisor has tasked you to make verifications and confirmations of the following: ? Debtors account for the year ended 31st March 2014. ? Motor vehicles expenses for the year ended 31st March 2014.
Highlight clearly the steps, the procedures and the matters you would take into account in order to verify and confirm the true position of these accounts. (12 marks)
b) Explain the benefits of planning for an audit assignment or engagement. (8 marks)
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QUESTION FIVE – (20 MARKS)
General controls in a computer system ensure that there is integrity of application, development and implementation of data files and also its operations.
Required;
(a) Highlight at least seven controls that are used to detect or prevent unauthorized changes to programs in the computer. (7 marks)
(b) Explain five controls that the auditor would take into consideration during program execution. (5 marks)
(c) Discuss four merits and demerits of using computers to process financial transactions and in bookkeeping. (8 marks)
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