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-Both functions require the auditors to adhere to the international standards on auditing.
-Both are carried out by competent auditors
- Both are interested in evaluating and testing the effective operations of the internal control system
- Both functions give recommendations to management on ways of improving the internal control system. The external auditor achieves this through the management letter, which is addressed to management.
• Both auditors are concerned about the strength and proper functioning of the internal control
system. The internal auditor is concerned it is his or her responsibility while the external
auditor is concerned as he or she relies on the strength of internal control system to carry
out systems based audits.
• Both auditors have as part of their duties to ensure that the company adheres to all relevant
laws and regulations.
• Both auditors interested in ensuring that the company keeps proper books of records. The
internal auditor uses the company accounts to appraise the functioning of the internal control
system while external auditor uses them to collect audit evidence to corroborate his audit
opinion.
• Both auditors are concerned about prevention and detection of errors and frauds. The
internal auditor ensures errors or frauds are prevented and detected by having strong
internal control system while the external auditor has the incidental duty of detecting and
preventing material errors and frauds which would otherwise distort the true and fair view of
the financial statements.
• Both auditors have interest in safeguarding company assets. The internal auditor through
strong internal control system ensures safety of company’s assets while external auditor
must ensure that company assets are safeguarded against theft and misuse so that the true
of fair view of financial statements is maintained.
johnson mwenjera answered the question on March 22, 2018 at 17:15
- Describe the following types of Audits:
i. Statutory Audits;
ii. Internal Audits;
iii. Private Audits;
iv. Management Audits;
(Solved)
Describe the following types of Audits:
i. Statutory Audits;
ii. Internal Audits;
iii. Private Audits;
iv. Management Audits;
Date posted: March 22, 2018. Answers (1)
- In addition to shareholders, many different parties are interested in the audited accounts of a company. Name FOUR such parties and state the significance...(Solved)
In addition to shareholders, many different parties are interested in the audited accounts of a company. Name FOUR such parties and state the significance of audited accounts to each one of them.
Date posted: March 22, 2018. Answers (1)
- Discuss the 4 main methods of determining depreciation(Solved)
Discuss the 4 main methods of determining depreciation.
Date posted: March 22, 2018. Answers (1)
- (a) Define control accounts (b) State the two main types of control accounts (c) State the purpose of control account(Solved)
(a) Define control accounts (b) State the two main types of control accounts (c) State the purpose of control account
Date posted: March 21, 2018. Answers (1)
- “Action must be specifically taken to prevent the occurrence of frauds involving the assets of the company”, Finance Director of Food All Limited addressing accounting...(Solved)
“Action must be specifically taken to prevent the occurrence of frauds involving the assets of the company”, Finance Director of Food All Limited addressing accounting staff of the company. Of particular interest to the directors are:
1. The safety of unclaimed wages
2. The receipt of cash from customers.
3. The company’s cheque books
4. Issue of credit notes to debtors.
Required:
a. For each of the above, explain how a fraud can occur in the area.
b. What controls should be in place to prevent the occurrence of each of the frauds described in (a) above?
Date posted: March 16, 2018. Answers (1)
- The Companies Act (Cap.486) sets out the duties of the auditors for a company in respect of his report and other matters.
Required:
a. State four situations under...(Solved)
The Companies Act (Cap.486) sets out the duties of the auditors for a company in respect of his report and other matters.
Required:
a. State four situations under which the Act requires auditors to qualify their report.
b. State two circumstances in which the auditors may qualify their report owing to inherent uncertainty.
c. State four types of circumstances in which the auditors may qualify their report as a result of disagreement with the directors
Date posted: March 16, 2018. Answers (1)
- The principle objective of the verification of liabilities, commitments and contingencies is to form an opinion as to their completeness, existence, valuation and presentation in...(Solved)
The principle objective of the verification of liabilities, commitments and contingencies is to form an opinion as to their completeness, existence, valuation and presentation in the financial statements.
Required:
a. Why does the auditor examine statements received from suppliers of goods and services?
b. How would the auditor ensure that at the year end all goods received by a client were included in both inventories and creditor balances?
c. How would the auditor ensure that the amounts accrued for wages and salaries due but unpaid were properly calculated and recorded in the books?
d. What tests would the auditor need to undertake in order to ensure that capital commitments at the year end were fairly stated in the books?
Date posted: March 16, 2018. Answers (1)
- The auditing guideline on ‘planning, controlling and recording’ contains the following statement with regard to working papers: ‘audit working papers should always be sufficiently complete...(Solved)
The auditing guideline on ‘planning, controlling and recording’ contains the following statement with regard to working papers: ‘audit working papers should always be sufficiently complete and detailed to enable an experience auditor with no previous connection with the audit subsequently to ascertain from them what work was performed and to support the conclusions reached.’
Required:
a) Describe four benefits that the auditor will obtain from working papers that meet the above requirement.
b) If the auditor has discovered that a claim for damages is a significant item requiring exercise of judgement in the financial statements, show what type of evidence on the matter the auditor must record in the current file. Give reasons for the inclusion of such evidence in the current file.
c) List three types of information which is normally retained in the audit file and state why such information should be available for reference in the course of an audit.
d) Comment on the desirability of using standardised working papers and give an example of such working paper and its use.
Date posted: March 16, 2018. Answers (1)
- 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:
• Whose responsibility is...(Solved)
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:
• Whose responsibility is it to ensure the existence of a strong system of internal controls?
• What value does a client obtain from the external auditor with respect to internal controls? Explain how the auditor provides that value.
b.
• What is the main role of the internal auditor with respect to internal controls?
• How does the external auditor assure himself that internal audit is effective?
Date posted: March 16, 2018. Answers (1)
- Three important aspects of an audit which must be planned for well in advance are:
a. Audit staffing requirements;
b. The timing of the audit field visits;
c. Clients use of...(Solved)
Three important aspects of an audit which must be planned for well in advance are:
a. Audit staffing requirements;
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.
b. Identify and list in point form the inputs to the planning process in respect of each of the three items stated above.
Date posted: March 16, 2018. Answers (1)
- Integrated Consulting Engineers Ltd. has undergone a period of substantial growth since its establishment ten years ago. Due to lack of accounting expertise within the...(Solved)
Integrated Consulting Engineers Ltd. has undergone a period of substantial growth since its establishment ten years ago. Due to lack of accounting expertise within the company, it has traditionally instructed its auditors, Shah & Company (CPA) to perform the two functions of accountancy and auditing. Shah & Company have also provided consultancy services to the company.
Arising from these responsibilities, Shah & Company earn 20% of their gross fees from Integrated Consulting Engineers Ltd.
Required:
a) Discuss the acceptability and desirability of Shah & Company continuing to act as accountants, auditors and consultants for the company.
b) If, despite having been re-elected as the company’s auditors, Shah & Company decide to resign during the year, state the procedures they should follow.
c) What action should Integrated Consulting Engineers Ltd. take on receipt of the letter of resignation from Shah & Company?
Date posted: March 16, 2018. Answers (1)
- Circumstances under which wages are treated as a capital expenditure(Solved)
Circumstances under which wages are treated as a capital expenditure.
Date posted: March 16, 2018. Answers (1)
- Advantages of maintaining control accounts(Solved)
Advantages of maintaining control accounts.
Date posted: March 16, 2018. Answers (1)
- Why should the name of a limited company contain the word limited?(Solved)
Why should the name of a limited company contain the word limited?
Date posted: March 15, 2018. Answers (1)
- Write brief notes on the following:
a. Final or completed audit:
b. Interim audit
c. Continuous audit;
d. Balance Sheet audit
(Solved)
Write brief notes on the following:
a. Final or completed audit:
b. Interim audit
c. Continuous audit;
d. Balance Sheet audit
Date posted: March 14, 2018. Answers (1)
- During the course of the audit, the auditor may need to consider audit evidence in the form of reports, opinions, valuations or statements from specialists.
Required:
a) List...(Solved)
During the course of the audit, the auditor may need to consider audit evidence in the form of reports, opinions, valuations or statements from specialists.
Required:
a) List four examples of situations where an auditor may wish to rely upon the report of a specialist.
b) Describe the principles or factors which the auditor should consider when placing reliance on audit evidence provided by specialists.
Date posted: March 14, 2018. Answers (1)
- Petty Shops Ltd. operates a large number of small retail outlets selling newspapers, sweets, cigarettes and sundry items. The internal control system provides for...(Solved)
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.
There are usually two members of staff on duty at each outlet at any one time with a considerable number of the staff being employed on a part-time basis. Petty Shops Ltd. employs a small internal audit department who visit each outlet at least twice each year.
Required:
a) State and explain four criteria which should be employed in assessing the effectiveness and the relevance of an internal audit function.
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.
c) State with reasons whether the external auditors would be expected to visit outlets every year.
Date posted: March 14, 2018. Answers (1)
- Explain the following terms: a. Materiality; b. The duty of confidentiality; c. Professional indemnity insurance;...(Solved)
Explain the following terms:
a. Materiality;
b. The duty of confidentiality;
c. Professional indemnity insurance;
d. Peer review;
e. Quality Control;
Date posted: March 14, 2018. Answers (1)
- a. Describe the principal purpose of a management letter. b. Your audit firm has acted for many years as auditors of Western Fishing Products Ltd. In the course of your audit(Solved)
a. Describe the principal purpose of a management letter.
b. Your audit firm has acted for many years as auditors of Western Fishing Products Ltd. In the course of your audit, you have come across the following matters, which you believe should be brought to the attention of the directors through a management letter.
• The company banks all its cheques and cash once a week; usually on a Friday afternoon.
• Unbanked cash is held in a petty cash box which is kept in the drawer of a desk in the general office. Only the financial controller and the general manager have access to the keys for the drawer and petty cash box.
• Suppliers statements once received are passed on to the purchases ledger clerk for checking against creditors account and subsequent filing. No further controls are implemented after the filing.
• The company’s stock taking instructions require that pre-numbered stock sheets be issued by and returned to the financial controller. During the stock take attendance you noted that the stock sheets in use were not pre-numbered as required.
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)
- You are the auditor of a manufacturing company which makes and sells ladies clothing. While checking the accounts at the date of the balance...(Solved)
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.
b. Indicate the additional work that must be carried out on the work in progress.
c. State three factors that could affect the accuracy of the figures given by the management.
Date posted: March 14, 2018. Answers (1)