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1. It provides assurance and credibility to the accounts in the audit report.
2. Disputes between management may be more easily settled. E.g. a partnership which has complicated profit sharing arrangements may require an independent examination of those accounts to ensure as far as possible an accurate assessment and division of those profits
3. Major changes in ownership may be facilitated if past accounts contain an unqualified audit report. For instance, where two sole traders merge their business to form a new partnership.
4. Applications to third parties for finance may be enhanced by audited accounts due to the credibility created by having the financial statements audited.
5. The audit is likely to involve an in-depth examination of the business and so may enable the auditor to give more constructive advice to management on improving the efficiency of the business.
Wilfykil answered the question on February 21, 2019 at 10:01
- Write briefly explanatory notes on the following types of audit:
i. Statutory audit;
ii. Private audit;
iii. Balance sheet audit;
iv. Management audit;(Solved)
Write briefly explanatory notes on the following types of audit:
i. Statutory audit;
ii. Private audit;
iii. Balance sheet audit;
iv. Management audit;
Date posted: February 21, 2019. Answers (1)
- 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)