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(i) Statutory audit
This is an audit carried out as per the requirements of the Company‘s Act for limited companies be they private or public. The Company‘s Act, Cap 486 requires that all limited companies submit their returns at the end of the financial period to
the registrar of companies and that these returns should include the audit report. In these audits, the auditors appointment is as per Section 159 (1) – (6) of the Company‘s Act. His rights and duties are defined in Section 162 (1) – (12). This Act opens up the auditors scope, rights and duties and extensions of his liabilities which cannot be limited by any powers be they the shareholders or Board of Directors. During such audits the auditor is free to obtain all the information and explanations he considers necessary for the purpose of forming an opinion.
(ii) Private audit also known as non-statutory audit.
These are audits conducted for private institutions, which are not required by any statutes to have their financial statements audited. The audits are not mandatory but are carried out for the convenience of such organizations. By virtue of its nature the auditor‘s scope, rights and duties are defined by an agreement between the auditors and owners or agents of the company. The auditor‘s obligations are contractual since they are based on an agreement between the auditor and his clients. This agreement is crucial as it forms the basis for defining the auditor‘s duties, rights and obligations. Thus the auditor should ensure that the agreement between him and the client clearly defines his scope. In such audits, the auditors rights and scope may be limited and due to such limitations the auditors opinion will usually contain a disclaimer clause.
(iii) Balance Sheet audit
These are audits in which the auditor starts his audit work from the balance sheet and traces entries to their original posting in a bid to prove their authencity. This audit concentrates on balance sheet entries and falls under partial audits as the auditor will not check all entries but will rely on evidence obtained on balance sheet entries to form conclusions as to whether all other entries are authentic. For this reason, this audit is only appropriate for organizations which have a strong internal control system or when conducting a special audit assignment where the client requires the auditor to only report on the balance sheet items.
(iv) Management audit
These involve the investigation of the company‘s entire management to ascertain their decision making process, especially of the top management and their attitude towards the operation of the internal control system, personal relationships with employees and their ability to manage an efficient and viable company.
It is ideal: -
a. Where there are dynamic operations in an organization.
b. For company‘s using high technology
Wilfykil answered the question on February 21, 2019 at 10:00
- The director of one of your growing clients have decided to create an internal audit function in their organizational structure(Solved)
The director of one of your growing clients have decided to create an internal audit function in their organizational structure
Required:
a) List and briefly describe the duties you would expect the internal audit staff to perform.
b) List and explain the criteria which you would consider before deciding to rely on the work of the internal audit function.
c) State the extent to which you, as an external auditor, can rely on the work of the internal audit function.
Date posted: February 21, 2019. Answers (1)
- Describe the various procedures of obtaining audit evidence giving an example of each by way of illustration.(Solved)
Describe the various procedures of obtaining audit evidence giving an example of each by way of illustration.
Date posted: February 21, 2019. Answers (1)
- Write a brief explanatory notes on the following terms in relation to audit evidence:
i. Relevance.
ii. Reliability.
iii. Sufficiency.(Solved)
Write a brief explanatory notes on the following terms in relation to audit evidence:
i. Relevance.
ii. Reliability.
iii. Sufficiency.
Date posted: February 21, 2019. Answers (1)
- Explain the meaning of the "audit evidence"(Solved)
Explain the meaning of the "audit evidence"
Date posted: February 21, 2019. Answers (1)
- Explain the meaning of the following audit terms:
i. Tests of control.
ii. Substantive tests.(Solved)
Explain the meaning of the following audit terms:
i. Tests of control.
ii. Substantive tests.
Date posted: February 21, 2019. Answers (1)
- List six examples of key control questions that would be suitable for inclusion in an ICEQ for a wages accounting system.(Solved)
List six examples of key control questions that would be suitable for inclusion in an ICEQ for a wages accounting system.
Date posted: February 21, 2019. Answers (1)
- Explain how an Internal Control Evaluation Questionnaire (ICEQ) differs from an Internal Control Questionnaire (ICQ).(Solved)
Explain how an Internal Control Evaluation Questionnaire (ICEQ) differs from an Internal Control Questionnaire (ICQ).
Date posted: February 21, 2019. Answers (1)
- Give four merits of using a flowchart to record an accounting system.(Solved)
Give four merits of using a flowchart to record an accounting system.
Date posted: February 21, 2019. Answers (1)
- The auditing standard on subsequent events provide the basic principles and procedures as to the auditor‘s responsibilities and deal with:
i. Dating the auditor‘s report
ii. Audit...(Solved)
The auditing standard on subsequent events provide the basic principles and procedures as to the auditor‘s responsibilities and deal with:
i. Dating the auditor‘s report
ii. Audit procedures
iii. Events after the date of the audit report.
Required:
a) In the context of subsequent events, what is the significance of the data of the auditor‘s report?
b) Outline the audit procedures considered necessary between the balance sheet date and the date of the auditor‘s report.
c) Summarise the appropriate actions of the auditor regarding events after the date of the audit report.
Date posted: February 21, 2019. Answers (1)
- Specialists or experts are occasionally required by external auditors mainly in connection with the valuation assets and the determination of liabilities.(Solved)
Specialists or experts are occasionally required by external auditors mainly in connection with the valuation assets and the determination of liabilities.
Required:
a) The necessity for reliance on specialist.
b) The extent to which the specialist should be independent?
c) Competence of the specialist.
Date posted: February 21, 2019. Answers (1)
- Most errors in computer based accounting systems can be traced to faulty input. Controls over the completeness and validity of all inputs are vital. Control...(Solved)
Most errors in computer based accounting systems can be traced to faulty input. Controls over the completeness and validity of all inputs are vital. Control over data conversions, controls over rejections and their correction and reprocessing, batch controls and computer edit controls affect both completeness and validity
Required:
a) Explain the controls that can be established over completeness of input.
b) What controls can be established over validity?
c) Programmed edit checks are probably the most familiar input controls and certainly the most effective. Give examples of these controls bringing out clearly:
i. The name of the edit control.
ii. Description of the control.
iii. The objective of the control.
Date posted: February 21, 2019. Answers (1)
- Your firm audits Clean Paints Ltd. and you are planning the audit of stock and work in progress for the year ended 31 December 2000....(Solved)
Your firm audits Clean Paints Ltd. and you are planning the audit of stock and work in progress for the year ended 31 December 2000. Clean Paints Ltd. determines the value of stock in its financial statements by the year -end stocktake. There is no perpetual Stock Inventory System though stock is counted quarterly for the purposes of management accounting
Stock and work in progress is held at the warehouse which is next to the company‘s factory.
Required:
a) State the areas that you will expect the client‘s stocktaking instructions to cover.
b) Describe the work you will perform and the matters you will record at the stock-take attendance.
Date posted: February 21, 2019. Answers (1)
- During the course of an audit, the auditor attempts to obtain sufficient relevant and reliable evidence to provide the satisfaction that the financial records are...(Solved)
During the course of an audit, the auditor attempts to obtain sufficient relevant and reliable evidence to provide the satisfaction that the financial records are completed and accurate. One of the ways that the auditor obtains satisfaction is to select representative samples of transactions and balances for detailed testing, such samples being made using either statistical of non-statistical methods.
Required:
a) Describe the main factors which influence the auditor in determining the size of the sample he will use for his detailed testing.
b) Describe three areas where the judgment will be exercised by the auditor when using statistical sampling.
Date posted: February 21, 2019. Answers (1)
- Write in point form an audit programme to cover salary and wages of a small size firm.(Solved)
Write in point form an audit programme to cover salary and wages of a small size firm.
Date posted: February 21, 2019. Answers (1)
- Define the term audit programme.(Solved)
Define the term audit programme.
Date posted: February 21, 2019. Answers (1)
- Write brief notes on the following auditing techniques:
i. Inspection;
ii. Observation;
iii. Enquiry.(Solved)
Write brief notes on the following auditing techniques:
i. Inspection;
ii. Observation;
iii. Enquiry.
Date posted: February 21, 2019. Answers (1)
- The matter listed below are always included in the internal control of a firm. You are required to explain the purpose of each of the...(Solved)
The matter listed below are always included in the internal control of a firm. You are required to explain the purpose of each of the items listed as (a), (b) and (c) below. Indicate the compliance tests you would carry out in order to ensure that the
intended controls were operating properly.
a) A requirement that mail is opened by two responsible employees who must promptly make listings of all receipts.
b) A rule that a fixed asset register must be maintained and updated promptly.
c) A requirement that a bank reconciliation statement is prepared on monthly basis.
Date posted: February 21, 2019. Answers (1)
- Working papers provide the audit evidence. They can be categorized into:
i. Auditors‘ prepared working papers.
ii. Client‘s schedules used as working papers.
iii. Audit programmes.
Working papers are...(Solved)
Working papers provide the audit evidence. They can be categorized into:
i. Auditors‘ prepared working papers.
ii. Client‘s schedules used as working papers.
iii. Audit programmes.
Working papers are then organized into files usually referred to as either current files of permanent files.
Required:
a) What details should each working paper which is prepared by an auditor indicate?
b) What details should each client schedule used as a working paper indicate?
c) What details should an audit programme indicate?
d) With appropriate illustrations, differentiate the use and contents of a permanent file from a current file and write brief notes on the evidence that is provided by working papers.
Date posted: February 21, 2019. Answers (1)
- Printa Limited is a large printing company, which has an on-line computer accounting system. The system is based around a central main frame computer, with...(Solved)
Printa Limited is a large printing company, which has an on-line computer accounting system. The system is based around a central main frame computer, with terminals serving individual departments. As part of the interim audit work, you have been asked to carry out a preliminary evaluation of ;
- The effectiveness of the computer controls over sales and debtors
Required:
Set out the points, which you would raise, in your preliminary evaluation of controls over sales and debtors
Date posted: February 21, 2019. Answers (1)
- It has often been said that the auditors‘ report is the formal result of all his efforts. This being the case, it is very important...(Solved)
It has often been said that the auditors‘ report is the formal result of all his efforts. This being the case, it is very important that the reader well understands the meaning of the Audit Report, particularly where the auditor wishes to qualify his opinion on the financial statements.
Required:
a) Under statutory provision, what are the main contents of the auditors‘ report?
b) Explain how the international standards on auditing attempt to ensure that the report of the auditors is clearly understood.
c) Describe clearly the circumstances in which an adverse opinion and a disclaimer of opinion would be appropriate and give two examples, one each, to illustrate your answer. (A full audit opinion is not required).
Date posted: February 21, 2019. Answers (1)