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Hbc2215:Auditing Ii Question Paper
Hbc2215:Auditing Ii
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2014
QUESITON ONE – (30 MARKS)
In the recent years public and market attention has significantly shifted to good corporate governance (as the actions, the manner and system of governing) together with adequate disclosures in the financial statements as a top up of improving greater prudence in financial management and assurance in the corporate enterprises both in the public and private sector.
Required:
(a) Elucidate the likely reasons behind the public and markets demand for good corporate governance. (10 Marks) (b) A component of good corporate governance is for each corporate enterprise to have an audit committee. (i) What are duties and responsibilities of an audit committee? (5 Marks) (ii) Discus the benefits of audit committees especially in the public sector enterprises. (5 Marks) (c) Explain comprehensively the benefits of accounting and auditing standards. (5 Marks) (d) Discuss the benefits of effective and functioning internal controls. (5 Marks)
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QUESTION TWO – (20 MARKS)
The modern approach to auditing is system based or risk based auditing and the auditor does not need to verify all the transactional documents and accounts of enterprises if satisfied that there are effective systems and adequate internal controls that fully safeguards assets.
Required:
(a) Define the term risk based auditing. (2 Marks) (b) Discuss the following components of risk (i) Inherent risk (3 Marks) (ii) Control risk (3 Marks) (iii) Detection risk (3 Marks) (c) Elucidate why it is important for the auditor to assess risks and incorporate risks assessment in the audit planning. (6 Marks) (d) Explain why there has been increase of risk auditing approach in recent times, in auditing of many corporate enterprises in Kenya (3 Marks)
QUESTION THREE – (20 MARKS)
The international auditing practices committee requires that doubts about the going concern aspects of an enterprise be detected and adequately disclosed in the financial statements and in the auitor’s reports.
Required:
(a) Explain the term going concern in relation to preparation of financial statements and the external auditors responsibility. (4 Marks) (b) Discuss at least six factors that can cast doubt on the going concern status of a company. (6 Marks) (c) Highlight with clear examples the audit procedures the auditor should undertake in order to obtain sufficient audit evidence to be able to form an opinion on the going concern status of the company. (6 Marks) (d) Explain the respective responsibilities of the directors and managers of a company with respect to the financial statements. (4 Marks)
QUESTION FOUR – (20 MARKS)
Your firm of certified public accountants has won tender for audit of a Local Dairy Cooperative society here at Meru for the year 2014. The firm buys milk from farmers process it and sell the milk products in packets, milk , yorghurt and ghee to leading supermarkets in Meru, Embu,
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Kitui, Marsabit, Tharaka Nithi, Nyeri, Laikipia and Isiolo counties. The firm employs over 80 workers directly and 2000 persons indirectly, with a portfolio of assets to the tune of 50 million.
Required
(a) Highlight the factors or matters you would consider on your audit plan if the firm appointed you as the audit leader, to carry out this audit activity and issue an audit report at the end of the audit. (5 Marks) (b) Discuss the procedures or the tests you would use to gather evidence in order to provide an opinion with regard to the societ’s accounts an financial statements. (5 Marks) (c) Outline the steps you would take in your audit programme to satisfy yourself that all income for the ear has been roerl an correctl receive an ut into the societ’s account. (6 Marks) (d) ihliht the liel threats to auitor’s independence while carrying out the audit. (4 Marks)
QUESTION FIVE – (20 MARKS)
Gikundi has just graduated from MUST with B.Com (Hons) degree. He also holds diploma in Computer Science. His parents have opened up a hardware business at Meru Makutano a huge investment company selling both slow and fast moving hardware and electrical goods with a sales turnover of Shs.50million annually. Upon taking over as a new manager, Gikundi has decided that a computerized bar code system to record goods received sales and inventory quantities be installed and was immediately installed. The computer system allows
- New products and new selling prices to be added or amended. - Inventory quantities to be amended from difference found during the inventory count. - Lower prices to be charged to customers where a product is damaged.
Required
(a) Describe edit checks which should be incorporated into the computer system to ensure that details of goods received are correctly entered into the computer. (4 Marks) (b) Suggest with reasons how frequently should the stocks count be done. (4 Marks) (c) Describe the procedures the company should carry out to ensure that the stock quantities in the computer system are accurate. (4 Marks) (d) Describe the controls which should be put in place to ensure that prices of products in the computer standing file match with those of corresponding products in the stores. (4 Marks) (e) Highlight some of the merits and demerits of use of computers in accounting and auditing. (4 Marks)
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