a) According to ISA 210, the principal contents of an engagement letter include reference to:-
a) The objective of the audit of financial statements.
b) Managements responsibility for the financial statements
c) The scope of the audit, including reference to applicable legislation, regulations, or pronouncements of professional
bodies to which the auditor adheres.
d) The form of any reports or other communication of results of the engagement.
e) The fact that because of the test nature and other inherent limitations of an audit together with the inherent
limitations of any accounting and Internal Control System, there is an unavoidable risk that even some material
misstatement may remain undiscovered.
f) Unrestricted access to whatever records, documentation and other information requested in connection with the audit
(b) The engagement letter serves the following purpose:-
i) The letter defines the scope of work to be carried out and the respective responsibilities of the auditor and the client under the engagement. This helps in avoiding misunderstandings between the client and the auditor as regards to the scope of the work to be carried out and the respective responsibilities of both parties.
ii) The letter documents and confirms the auditor‘s acceptance of the appointment
iii) It explains the forms of any reports to be issued under the engagement
iv) To educate the client on: -
- His duty to maintain proper books of accounts and to prepare financial statements that show a true and fair view.
- His duty to prevent errors and frauds.
- His duty to provide all the necessary information
- That the audit should not be relied upon to detect errors and frauds.
- To explain that the audit will be carried out on a test basis.
- Basis of charging his fees.
v) Minimise auditor‘s liability to third parties. The auditor may include a clause in the engagement letter limiting the client from distributing the audit report to parties other than those agreed on an identified in the engagement letter.
Wilfykil answered the question on February 21, 2019 at 11:16
- 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...(Solved)
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 the new system
Date posted: February 21, 2019. Answers (1)
- State six examples of controls to prevent unauthorised changes to data files that you would expect to find in a new computer based accounting system(Solved)
State six examples of controls to prevent unauthorised changes to data files that you would expect to find in a new computer based accounting system
Date posted: February 21, 2019. Answers (1)
- In the context of a computer based accounting system, explain the meaning of the following terms:
i) Application controls
ii) General controls(Solved)
In the context of a computer based accounting system, explain the meaning of the following terms:
i) Application controls
ii) General controls
Date posted: February 21, 2019. Answers (1)
- You have been asked by your firm to examine the payment vouchers of a company to establish the level of errors and then decide whether...(Solved)
You have been asked by your firm to examine the payment vouchers of a company to establish the level of errors and then decide whether better results can be obtained through statistical techniques.
Required:
a) State the steps you would take in order to test the vouchers for the errors.
b) Why is it not satisfactory to pick vouchers from a limited period?
c) State under what circumstances statistical sampling is a good technique
Date posted: February 21, 2019. Answers (1)
- Write brief explanatory notes on the following audit terms:
a) Control procedures;
b) Internal check;
c) Vouching audit;
d) Walk-through tests;
e) Weakness tests;(Solved)
Write brief explanatory notes on the following audit terms:
a) Control procedures;
b) Internal check;
c) Vouching audit;
d) Walk-through tests;
e) Weakness tests;
Date posted: February 21, 2019. Answers (1)
- Outline the statutory provisions with regard to duties of external auditors(Solved)
Outline the statutory provisions with regard to duties of external auditors
Date posted: February 21, 2019. Answers (1)
- Explain the value derived from the work of external auditors.(Solved)
Explain the value derived from the work of external auditors.
Date posted: February 21, 2019. Answers (1)
- 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)