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Dac 401: Principles Of Auditing Question Paper

Dac 401: Principles Of Auditing

Course:Bachelor Of Commerce

Institution: University Of Nairobi question papers

Exam Year:2012

QUESTION ONE
(a) According to ISA 500, financial statement assertions are assertions by management explicit of otherwise, that are embodied in the financial statements. Identify and explain the five assertions about classes of transactions and events for the period under audit (15 marks)

(b) Briefly discuss the following theories on the demand and supply of audit services (10 marks)

(i) Policeman Theory
(ii) Lending Credibility Theory
(iii) Theory of Inspired Confidence
(iv) Agency Theory

QUESTION TWO
(a) Distinguish between operational audit and compliance audit (15 marks)

(b) Your neighbour, Wetangula Smart, invited you for lunch yesterday. Sure enough, it was no 'free lunch' because Wetangula Smart wanted to discuss the annual reports of Davasco Co. Ltd. He owns Davasco stock and has just received the annual report. Smart says ''Price Water-house Coopers prepared the audited financial statements and gave an unqualified opinion, so my investment must be safe''

Required: What misconceptions does Wetangula Smart seem to have about the auditor's role with respect to Davasco Co. Ltd? (10 marks)

QUESTION THREE
(a) Explain the FOUR legal standards of proof for legal evidence (8 marks)

(b) What is significant appropriate evidence to support audit conclusions is a matter of professional judgement by the auditor.

Required: What considerations does the auditor take into account in making this judgement? (14 marks)

(c) Distinguish between Tests of Details and Tests of Balances. (3 marks)

QUESTION FOUR
State and explain FIVE fundamental principles of ethics applicable to all accountants according to the IFAC Code of Ethics for Professional Accountants. (25 marks)

Dac 401: Principles Of Auditing Question Paper

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