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Accf 432Auditing 1 Question Paper

Accf 432Auditing 1

Course:Business Administration

Institution: Kenya Methodist University question papers

Exam Year:2011

KENYA METHODIST UNIVERSITY

END OF 3''RD ''TRIMESTER 2011 EXAMINATIONS
FACULTY : SCHOOL OF BUSINESS AND MANAGEMENT
DEPARTMENT : BUSINESS ADMINISTRATION
UNIT CODE : ACCF 432
UNIT TITLE : Auditing 1

TIME: 2 HOURS

Instructions:

Answer Question ONE and Any Other TWO Questions.
Marks are allocated at the end of the Question.
Express yourself legibly and intelligently

Question One

(i) What are general matters to be considered y an auditor while taking up

an engagement. (4 Marks)

(ii) What are the major sources of obtaining information about the client
business? (4 Marks)

State with reasons (in short) whether the following statements are True or False.
Auditors lien on his client’s books and records is not unconditional.
An adverse report is one which an auditor given an opinion subject to certain reservation.
Cut-off procedures are generally applied to trading transactions.
Components of Audit risk does not include sampling risk.
Company Audit regulation order does not apply to foreign companies.
Test checks refers to routine checks that are carried out in the normal cause of business.
If an auditor believes that the concern will not continue as a going concern, he should issue a disclaimer of opinion.
An explained decrease in gross profit ratio may result due to fictitious sales.
If the auditor appointed at the AGM refuses to accept the same, the company can appoint another person by holding a general meeting.
An auditor is considered to lack independence, if the partner of the firm owns the building in which the client business is situated.

(10 Marks)

Explain in brief the utility of working paper to an Auditor.

(2 Marks)

M/S PQRS Associates, Certified Public Accountants have been appointed statutory Auditors of a listed company for the year ended 31st March, 2010. Draft an appropriate engagement letter to be sent to the Board of Directors for the same.

(10 Marks)

Question two

Write short notes on the following:

Audit Techniques

(4 Marks)

Supervision of Audit Work

(4 Marks)

Walk Through Test

(4 Marks)

Cut-off Procedure

(4 Marks)

You are approached by a partnership firm to list out the advantages that will accrue to them if the accounts are audited. State FIVE important advantages.

(4 Marks)

Question Three

As an Auditor, comment on the following situations.

As an auditor of PQR Ltd you have asked your audit assistant to draw up the audit programme. The assistant drew up the audit programme without going through the monthly report of internal audit report on the plea that he is a CPA and have found no serious irregularities and the internal control system is running perfectly.

(7 Marks)

Mr. T a CPA was first time appointed as an auditor of XYZ Ltd. Mr. T carried the audit procedure for verifying the opening balances only, but not the previous year’s accounting policies as it is needed.

(5 Marks)

Explain the following in brief:

Relationship between materiality and audit risk.

(4 Marks)

Relationship between statutory Auditor and internal Auditor.

(4 Marks)

Question Four

Write a short note on "teaming and lading" process of fraud and state what steps you will take to detect such fraud.

(10 Marks)

(b) Describe a good internal check system regarding credit sales. (10 Marks)

Question Five

Write short notes on the following:

Auditors Skeptism

(4 Marks)

Inherent risk

(4 Marks)

An auditor of a limited company is not responsible for undetected errors or frauds in a balance sheet, where there is nothing to excite his suspicion". Comment on this statement, giving reasons for your answer with reference to two legal decisions.

(12 Marks)

Accf 432Auditing 1 Question Paper

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