. a) Benefits
i.To control the current year’s work. A record of work done is essential for:
• The audit clerk to see that he has done all that he should.
• His supervisor, manager, the partner to whom he is responsible and other persons who will review the work he had done.
• Enabling evidence to be available in the final overall review stage of an audit so as to consider if accounts show a true and fair view.
• Working papers collected in investigation of one part of an enterprise may be used in the verification process for another part.
• The audit of one part of an enterprise is not to be conducted in isolation.
ii. To form a basis for the plan of audit in the next year clearly a starting point for a year’s audit is the review year could lead to:
a. Client staff getting to know the procedures.
b. They could design frauds, which the procedures will not uncover.
iii. Evidence of work carried out.
Audit clerk need to provide evidence to their superiors that they have carried out the work. Evidence of the work carried out may be needed in a court of law.
b) Claim for damages. Matters to record in the current file.
• Document of external verification e.g. a court statement showing the event causing the Details showing the estimated amounts of the claim.
• Copy of explanations by management about the law suit as this will give evidence to the auditor on the probability of receiving the claim.
• Written confirmation by the defendant that he will pay the amount in question.
• The company’s follow up on the matter. To determine how soon the claim will be received.
c) Write 3 types of information into the permanent file.
• An outline history of the organisation.
• List of accounting matters of importance.
• Addresses of the registered office and all other premises with a short description of the work carried on at each.
d) Standardisation of working papers.
Most firms adopt a system of standard working papers which can be used on all audits. This has many advantages including:
• Efficiency.
• Staff become familiar with them.
• Matters are not overlooked.
• They assist to instruct staff.
• Work can be delegated to lower level staff.
• Work can more easily be controlled and reviewed.
Disadvantages are;
• Work becomes mechanical.
• Work becomes standard.
• Client staff may become familiar with the method.
• Initiative may be stifled.
• The exercise of necessary professional judgement is reduced.
Musyoxx answered the question on March 16, 2018 at 16:40
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Required:
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a. The external auditor of a company uses the system of internal control to determine the nature, extent and timing of his audit tests.
Required:
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• What value does a client obtain from the external auditor with respect to internal controls? Explain how the auditor provides that value.
b.
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Date posted: March 16, 2018. Answers (1)
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b. The timing of the audit field visits;
c. Clients use of computerised systems.
Required:
a. Explain the importance of each of the above matters for the successful conduct and completion of the audit.
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Date posted: March 16, 2018. Answers (1)
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Required:
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Required:
a) List...(Solved)
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Required:
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Petty Shops Ltd. operates a large number of small retail outlets selling newspapers, sweets, cigarettes and sundry items. The internal control system provides for all books to be kept at head office with a branch stock account at selling price. Each outlet is required to bank receipts daily and intact; and to make a weekly stock report. All stock other than newspapers and magazines required by an outlet must ordered from the company’s central warehouse and is delivered twice weekly. Each outlet receives daily deliveries of newspapers and magazines direct from the supplier.
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Required:
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b) Identify three types of fraud to which Petty Shops Ltd. may be particularly vulnerable in operating a large number of small outlets. In circumstances where the auditors have identified high risk areas within an audit, give five keyelements which should exist in the general audit approach to these areas.
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a. Describe the principal purpose of a management letter.
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Required.
Draft a management letter to the managing director highlighting the above weakness, their implications and suitable recommendations to overcome them.
Date posted: March 14, 2018. Answers (1)
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You are the auditor of a manufacturing company which makes and sells ladies clothing. While checking the accounts at the date of the balance sheet you receive from management a certificate showing the value of stock and work in progress. You feel that additional work is necessary to confirm the correctness of the figures.
Required:
a. Describe the procedure you would carry out when checking the stock sheets.
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Date posted: March 14, 2018. Answers (1)
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Required:
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Tamu Tamu Limited is a general trading company. It has presented its annual accounts for audit for the year ended 31 December 1996.
Required:
a) State how you would verify the following assets:
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• Motor vehicles;
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Date posted: March 14, 2018. Answers (1)
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a. Briefly explain two practical circumstances when the auditor may be liable for damages arising from material misstatements in published financial statements on which the auditors have expressed an audit opinion.
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Date posted: March 14, 2018. Answers (1)
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Required:
Explain to the directors of Restmount Kenya Ltd.
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Date posted: March 14, 2018. Answers (1)
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a. Explain the meaning of the following phrases:-
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Date posted: March 14, 2018. Answers (1)
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Required:
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The Auditors Operational Standard requires the auditor to obtain ‘relevant and reliable audit evidence sufficient to enable him to draw reasonable conclusions therefrom.’
Required:
a. What is audit evidence?
b. Explain the meaning of the following terms;
• Relevant audit evidence
• Reliable audit evidence
• Sufficient audit evidence.
c. Explain whether the following types of audit evidence meets the standards of relevancy, reliability
and sufficiency as required by the auditors operational standard with regard to:
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Date posted: March 14, 2018. Answers (1)
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During the final stages of the first audit of Nairobi National Bank Ltd. you request the client to provide you with a letter of representation. The client reads the representations you are requesting and refuses to furnish the letter. The client states its position to be as follows:
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Required:
a. Explain to the client the purpose of the letter of representation
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c. With specific examples of items which may appear in a letter of representation
d. Explain the reliability of a letter of representation as audit evidence and the extent to which the
e. auditors could rely on this evidence.
f. (d) Explain the consequence of your client’s refusal to furnish a letter of representation.
Date posted: March 14, 2018. Answers (1)
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a. Explain why auditors carry out circularisation of debtors
b. Distinguish between ‘positive’ and ‘negative’ debtors circularisation procedures
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Date posted: March 14, 2018. Answers (1)
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Required:
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Members of the accounting profession in common with other professions have taken steps to reduce professional risk as far as possible.
Required:
a. With reference to accounting profession, what is audit risk?
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c. Suggest specific actions an individual auditor or audit firm could take to minimise liability arising from audit risk.
Date posted: March 14, 2018. Answers (1)