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1. Physical verification of motor vehicle.
2. Test of controls on purchasing of motor vehicle to booking of it on fixed asset register.
3. Substantive audit procedures on newly purchased motor vehicle.
4. Substantive audit procedures on disposal (This is important if there are any profit/loss on disposal of assets during the auditing period)
5. Substantive Analytical audit procedure on depreciation. (Calculating the depreciation based on the company policy to see if the depreciation amount makes sense)
Jose2013 answered the question on November 14, 2018 at 12:44
- List four advantages that would accrue to members of an accounting professional body from "peer review"(Solved)
List four advantages that would accrue to members of an accounting professional body from "peer review".
Date posted: October 12, 2018. Answers (1)
- Assuming that You have been invited by chamber of Commerce, so as to give a talk on sources of Finance...(Solved)
Assuming that You have been invited by chamber of Commerce, so as to give a talk on sources of Finance, apart from the loans or overdrafts offered by financial institutions. You are requested to advice the participants on alternative forms of finance that are available to a local borrower.
Date posted: September 10, 2018. Answers (1)
- Explain the following terms: (a) Materiality; (b) The duty of confidentiality; (c) Professional indemnity insurance; (d) Peer review; ...(Solved)
Explain the following terms:
(a) Materiality;
(b) The duty of confidentiality;
(c) Professional indemnity insurance;
(d) Peer review;
(e) Quality Control.
Date posted: August 13, 2018. Answers (1)
- (a) Do you believe that the auditors should be responsible to users other than the shareholders? Give reasons to support your answer. (b) Does the...(Solved)
a) Do you believe that the auditors should be responsible to users other than the shareholders? Give reasons to support your answer.
b) Does the auditor require a codified definition of “reasonable care and skill” or should this be left to professional judgment? Explain.
c) Why should the auditor be unwilling to take full responsibility for the detection of fraud during the annual audit? Explain.
d) Discuss the proposition that the „expectations gap? has arisen because of the public?s ignorance and should therefore be resolved by the public themselves.
Date posted: August 13, 2018. Answers (1)
- Outline the risks associated with cloud computing(Solved)
Outline the risks associated with cloud computing.
Date posted: August 10, 2018. Answers (1)
- Explain how you would verify the following: a) Investment income.
b) Bank balances.
c)...(Solved)
Explain how you would verify the following: a) Investment income.
b) Bank balances.
c) Contingent liabilities.
d) Petty cash balances.
Date posted: August 8, 2018. Answers (1)
- Audit planning process allows the audit senior to acquire adequate knowledge about the entity. This process ensure an effective control of audit work. ...(Solved)
Audit planning process allows the audit senior to acquire adequate knowledge about the entity. This process ensure an effective control of audit work.
Required:
a) Explain the auditor's planning process when planning for an audit of a new client. b) How does audit planning assist in the conduct of an audit?
c) Explain the following controlling procedures in a well planned audit:
i. Direction and supervision of work. ii. Review and co-ordinating of work. iii. Quality controls
Date posted: August 8, 2018. Answers (1)
- You are the manager responsible for the audit of ABC Company, which has...(Solved)
You are the manager responsible for the audit of ABC Company, which has a turnover of KShs 750 million. The company has been audited by your firm for a number of years and this is the second year you have been responsible as manager for the audit. However, owing to your responsibilities for other audits you are only intending to make periodic visits to the company during the course of the audit and you will not be involved in any of the detailed audit work.
Required
a) State the matters you would consider in planning the audit, prior to the commencement of the detailed audit work. b) Describe the way in which you would control the audit from the commencement of the work by the audit staff to the review stage by the partner immediately prior to him signing the audit report
Date posted: August 4, 2018. Answers (1)
- a) In the context of a computer based accounting system, explain the meaning of the following terms:
i. Application controls;
ii. ...(Solved)
a) In the context of a computer based accounting system, explain the meaning of the following terms:
i. Application controls;
ii. General controls
b) Explain the importance of having proper systems documentation
c) A Company wishes to change from an old computerised system to a new computer based accounting system. Explain how and why both systems should run parallel prior to the change over to the new system.
Date posted: August 4, 2018. Answers (1)
- (a) Briefly explain the meaning of the term "control procedures".
(b) What is the importance of...(Solved)
(a) Briefly explain the meaning of the term "control procedures".
(b) What is the importance of segregation of duties as a control procedure'? (c) In carrying out an audit, the auditor appraises and tests the system of internal control in order to ascertain that it is capable of processing transactions or determining quantities and values completely and accurately. The auditor further carries out substantive tests in an attempt to ensure that the transactions, assets and liabilities recorded in the accounting records upon which the figures in the financial statements are based, are completely and accurately recorded. Required: List and briefly explain the substantive tests the auditor would carry out to verify the values attributed to: (i) Trade debtors in a company's financial statements.
(ii) Trade creditors in a company's financial statements.
Date posted: August 4, 2018. Answers (1)
- Your firm is the auditor of Shah Engineering Ltd, and you have been...(Solved)
Your firm is the auditor of Shah Engineering Ltd, and you have been asked to suggest the audit work you will carry out in verifying trade creditors and purchase accruals at the company’s year-end of 31 December 2003. You attended the stock take at the year-end. The Company operates from a single site and all raw materials for production are received by the goods inwards department. When the materials are received they are checked for quantity and quality to the delivery note and purchase order, and a multi—part goods received note is made out and signed by the storekeeper. If there are any problems with the raw materials, a discrepancy note is raised which gives details of the problems (e.g., incorrect quantities or faulty materials) The purchase accounting department receive the purchase invoice, check them to the purchase order and goods received note and post them to the purchase ledger. At the end of each month, payments are made to suppliers. The purchase ledger is maintained on a microcomputer. The main sundry creditors and accruals at the year-end include:
a) Wages accruals and PAYE;
b) VAT;
c) Interest on loans overdrafts, telephone and electricity. Most employees’ wages are paid weekly in arrears.
You are required to describe in detail the audit work you will carry out to:
a) Check suppliers’ statements to the balances on the purchases ledger;
b) Verify that purchases cut-off has been correctly carried out at the year end.
c) Ensure that sundry creditors and accruals are correctly stated;
Date posted: August 4, 2018. Answers (1)
- You are carrying out the audit of ACB Computers limited for the year...(Solved)
You are carrying out the audit of ACB Computers limited for the year ended 31 December 2003. The company assembles microcomputers purchased from the Far East and sells them to retailers, and to individuals and other businesses. In the current year, there has been a recession and strong competition, which has resulted in a fall in sales and the profits. This has led to a trading loss and the company is experiencing going concern problems.
Required:
a) Describe the factors, which indicate that a company may not be a going concern. Your list should include all factors and not just those, which relate to ACB Computers Limited.
b) Consider the form of audit report (i.e. qualified or unqualified) you would issue of ACB Computers limited if you conclude that the company is experiencing serious going concern problems, in the following two situations: I) You conclude that the financial statements give sufficient disclosure of the going concern problems.
II) There is no disclosure of the going concern problems in the financial statements and you believe there is a serious risk that the company will fail in the foreseeable future.
c) State the parties who may successfully sue you as auditor for negligence, and consider the arguments you could include in your defense when: I) The financial statements of ACB Computers Limited for the year ended 31 December 2003 do not mention any going concern problems and your audit report on these financial statements was unqualified and II) The company fails on 15 February 2004
Date posted: August 4, 2018. Answers (1)
- The responsibilities of external auditors are not always well understood, especially
with regard to the detection and reporting of fraud. When external auditors provide
non-audit...(Solved)
The responsibilities of external auditors are not always well understood, especially
with regard to the detection and reporting of fraud. When external auditors provide
non-audit services to their audit clients, it is essential that the auditors make a clear
distinction between their audit and non-audit responsibilities.
Required:
a) Explain the responsibilities of external auditors to directors and shareholders
b) Describe the limitations of the external audit in relation to the detection and
reporting of fraud.
c) Explain why it is essential for external auditors to be independent of their clients.
d) Explain the advantages and disadvantages of external auditors providing
consulting services to their audit clients.
Date posted: August 4, 2018. Answers (1)
- Towards the end of an audit, it is common for the external auditor to seek a letter of
representation (written representations) from the management of the...(Solved)
Towards the end of an audit, it is common for the external auditor to seek a letter of
representation (written representations) from the management of the client company.
Required:
(a) Explain why auditors seek letters of representation.
(b) List the matters commonly included in the letter of representation.
(c) Explain why it is important to discuss the content of the letter of representation at
an early stage during the audit.
(d) Explain why management is sometimes unwilling to sign a letter of representation
and describe the actions an external auditor can take if management refuses to sign
a letter of representation.
Date posted: August 4, 2018. Answers (1)
- a) Internal control systems are designed, amongst other things, to prevent error and
misappropriation.
Required:
Describe the errors and misappropriations that may occur if the following are not
properly...(Solved)
a) Internal control systems are designed, amongst other things, to prevent error and
misappropriation.
Required:
Describe the errors and misappropriations that may occur if the following are not
properly controlled:
(i) Receipts paid into bank accounts;
(ii) Payments made out of bank accounts;
(iii) Interest and charges debited and credited to bank account
(b) A book-selling company has a head office and 25 shops, each of which holds cash
(banknotes, coins, and credit card vouchers) at the balance sheet date. There are
no receivables. Accounting records are held at shops. Shops make returns to head
office and head office holds its own accounting records. Your firm has been the
external auditor to the company for many years and has offices near to the
location of some but not all of the shops.
Required:
List the audit objectives for the audit of cash and state how you would gain the audit
evidence in relation to those objectives at the year-end.
c) The external auditors of companies often write to companies’ bankers asking for
details of bank balances and other matters at the year-end.
Required:
Explain why auditors write to companies’ bankers and list the matters you would
expect banks to confirm.
Date posted: August 4, 2018. Answers (1)
- Citing six reasons, justify why an accounting officer of a procuring entity, may, at any time, prior to notification of tender award, terminate or...(Solved)
Citing six reasons, justify why an accounting officer of a procuring entity, may, at any time , prior to notification of tender award, terminate or cancel procurement or asset disposal proceedings without entering into a contract.
Date posted: July 23, 2018. Answers (1)
- What is cost accounting?(Solved)
What is cost accounting?
Date posted: July 11, 2018. Answers (1)
- List the purposes of the trial balance(Solved)
List the purposes of the trial balance
Date posted: June 25, 2018. Answers (1)
- What are the setbacks associated with group incentive schemes?(Solved)
What are the setbacks associated with group incentive schemes?
Date posted: June 24, 2018. Answers (1)
- From the following information prepare a cost statement clearly showing the various components of the cost of production (20 Marks)
Sh.
stock on 1st January 2007 48,000
Raw materials 9,800
work in...(Solved)
From the following information prepare a cost statement clearly showing the various components of the cost of production (20 Marks)
Sh.
stock on 1st January 2007 48,000
Raw materials 9,800
work in progress 120,000
finished goods 148,000
wages paid to the factory workers 52,000
factory insurance 400,000
plant balance on 1st January 2007 180,000
factory rent 200,000
cleaning costs 350,000
purchase of raw materials
stocks at 31st December 2007
Raw materials 21,000
work in progress 6,000
carriage on raw materials 42,000
return of raw materials to suppliers 6,200
salary of marketing manager 200,000
fixed admission expenses 140,000
salesman commission 60,000
Date posted: June 20, 2018. Answers (1)