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a) Monitoring costs. They arise as a result of mechanisms put in place to ensure interests of shareholders are met. They include cost of hiring external auditors, bonding assurance which is insurance taken out where the firm is compensated if manager commits an infringement, internal control system implementation.
b) Opportunity costs which are incurred either because of the benefit foregone from not investing in a riskier but more profitable investment or in the due to the delay in decision making as procedures have to be followed(hence, a timely decision will not be made)
c) Restructuring costs are those costs incurred in changing or altering an organizations structure so as to prevent undesirable management activities.
d) Board of directors- a properly constituted board plays the oversight role on management for the shareholders.
Judiesiz answered the question on May 22, 2018 at 12:29
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Date posted: May 22, 2018. Answers (1)
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Date posted: April 14, 2018. Answers (1)
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Date posted: April 14, 2018. Answers (1)
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Date posted: April 10, 2018. Answers (1)
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policies, safeguarding of assets,...(Solved)
(a) Internal controls over non-current assets are designed to ensure the
orderly and efficient running of the business, adherence to management
policies, safeguarding of assets, the prevention of fraud and error and
the completeness and accuracy of the accounting records.
Required:
List the internal controls that a small printing company with office
equipment, motor vehicles and plant and machinery should have in place
to achieve the objectives described above.
(b) Audit sampling is a technique for drawing conclusions about the
characteristics of a population by testing a sample drawn there from.
Internal and external auditors use it for both tests of controls, and
substantive testing.
Required:
Describe the following:
(i) Judgement sampling and statistical sampling;
(ii) A representative sample;
(iii) Tolerable error;
(iv) Two different methods of selecting a representative sample;
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Date posted: April 3, 2018. Answers (1)
- Your firm is the newly appointed external auditor to a large company that
sells, maintains and leases office equipment and furniture to its customers
and...(Solved)
Your firm is the newly appointed external auditor to a large company that
sells, maintains and leases office equipment and furniture to its customers
and you have been asked to co-operate with internal audit to keep total
audit costs down. The company wants the external auditors to rely on
some of the work already performed by internal audit.
The internal auditors provide the following services to the company:
(i) A cyclical audit of the operation of internal controls in the company’s
major functions (operations, finance, customer support and
information services);
(ii) A review of the structure of internal controls in each major function
every four years;
(iii) An annual review of the effectiveness of measures put in place by
management to minimise the major risks facing the company.
During the current year, the company has gone through a major internal
restructuring in its information services function and the internal auditors
have been closely involved in the preparation of plans for restructuring,
and in the related post-implementation review.
Required:
a) Explain the extent to which your firm will seek to rely on the work of
the internal auditors in each of the areas noted above.
b) Describe the information your firm will seek from the internal auditors
in order for you to determine the extent of your reliance.
c) Describe the circumstances in which it would not be possible to rely on
the work of the internal auditors.
d) Explain why it will be necessary for your firm to perform its own work
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Date posted: March 30, 2018. Answers (1)
- You are auditing the financial statements of Newbridge Trading plc, for the year-ended 31 October 1997.
The senior partner of your audit firm has...(Solved)
You are auditing the financial statements of Newbridge Trading plc, for the year-ended 31 October 1997.
The senior partner of your audit firm has asked you to consider the auditor‟s responsiresponsibilities for identifying subsequent events. Also, he has asked you to describe the audit procedures, which examine subsequent events. He has suggested that an example of one point in answer to part (b) below would be:
„Checking sales ledger cash received after the year-end to determine the realisability of debtors at the year-end and highlight doubtful debts.‟
The detailed audit work was completed on Friday 5 December 1997. It is proposed that:
a) The audit report will be signed on Friday 19 December;
b) The financial statements will be sent to shareholders on Monday 5 January 1998; and
c) The company‟s annual general meeting will be held on Wednesday 28 January 1998.
Required:
a) Consider the auditor‟s responsibilities for detecting material subsequent events in the periods:
i) 31 October to 5 December 1997 ii) 5 December to 19 December 1997 iii) 19 December 1997 to 5 January 1998
iv) 5 January 1998 to 28 January 1998
v) After 28 January 1998
b) List and briefly explain audit procedures, which involve examination of subsequent events.
c) Describe the audit work you will carry out in period (a) (ii) above.
Date posted: March 28, 2018. Answers (1)
- (a) What is meant by the term "fraud"? Give four examples of fraudulent activities.(Solved)
(a) What is meant by the term "fraud"? Give four examples of fraudulent activities.
(b) What do you consider to be the auditor?s responsibilities in the course of
the normal annual audit in relation to the detection of fraud?
(c) Explain the way in which the auditor should approach and perform his work in order to meet these responsibilities.
Date posted: March 28, 2018. Answers (1)
- Emali Co. Ltd. has undergone a period of substantial growth following its establishment five years ago. At the last annual general meeting Smith &...(Solved)
Emali Co. Ltd. has undergone a period of substantial growth following its establishment five years ago. At the last annual general meeting Smith & Co. Associates, a tow-partner firm of Certified Public Accountants were re-appointed as auditors. However, Smith & Co. Associates have decided that they do not have the necessary resources to audit the enlarge company.
Required:
a) Briefly, explain how Smith & Co. Associates may resign from its appointment before the next annual general meting.
b) How any a casual vacancy arising from the resignation of present auditors be filled and what procedures are necessary before the company‟s next annual general meeting at which the appointment will be presented for ratification?
c) Outline the steps the prospective auditor must take before deciding whether or not to accept the nomination as an auditor.
Date posted: March 28, 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.
(c) Describe in detail the work you would carry out in scrutinizing the replies to the debtors circularisation and in confirming whether the debtors balances are collectable in the following situations:
i. where the debtor does not agree with the balance and states a difference; (6 marks)
ii. where the debtor reports that he cannot confirm the balance
iii. where no reply is received from the debtor
Date posted: March 28, 2018. Answers (1)
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Required:
a)Define materiality.
b) Explain the importance of this concept to the auditor.
c) Suggest some criteria for determining cut-off point in order to assess the materiality of an error.
Date posted: March 28, 2018. Answers (1)