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a) The preparation of a bank reconciliation statement is carried out to reconcile the balances on the cash book to the company with the bank statement prepared by the bank and sent periodically to the entity. It is mainly carried out to ensure that all receipts and payments are promptly and accurately recorded.
Controls procedures over the bank reconciliation include: -
(i) Bank reconciliation should be prepared at least monthly.
(ii) The person responsible for preparation should be independent of the receipts and payments function or, alternatively, an independent person should check the reconciliation.
(iii) If the reconciliation is prepared by an independent person, he should obtain bank statements directly from the bank and hold them until the reconciliation is completed.
(iv) The preparation should preferably include a check of at least a sample of receipts and payments against items on the bank statements.
The tests of control I would carry out on the bank reconciliation includes: -
(i) Checking whether the reconciliations are indeed prepared as required.
(ii) Examine evidence of independent review of bank reconciliations e.g. a signature of reviewer.
(iii) Examine evidence of follow-up of outstanding items on bank reconciliation‘s. Pay particular attention to old outstanding reconciling items that should be written back such as old, un-presented cheques.
(iv) Verify that the reconciliations are accurately prepared by checking costs and that the current balances are picked as per the cashbook and bank statements.
b) Maintenance of a fixed assets register.
A fixed assets register is a list of all the fixed assets owned by a company. The company requires a fixed asset register in order to control and identify all the fixed assets, which it owns. The register should show: -
i. The serial number allocated to the asset. (Ideally, each asset should have its own unique identity number).
ii. Details of the type and specification of asset.
iii. Name of the supplier and date of purchase of the asset.
iv. Cost of the asset
v. Rate of depreciation and total depreciation charged to date.
vi. Location
vii. Expenditure incurred by way of maintenance and repair charges on the asset.
viii. Current net book value of the asset.
c) The existence of passwords in a micro- computer accounting system is aimed at achieving the following objectives:
- To restrict access to the computer program to authorised persons only;
- To protect the data and programs against unauthorised amendment. Employees are granted password rights that give them varying access rights. This ensures that amendments to data can only be made by those with the relevant access rights.
To confirm that these objectives are met the auditor should verify whether appropriate password controls are in place. He should also verify whether employees are given password rights that are appropriate for their duties and that there is appropriate segregation of duties in the rights awarded. The auditor should also inquire there have been any cases of data corruption or unauthorised amendements
Wilfykil answered the question on February 21, 2019 at 12:46
- Many auditors now use laptops computers to perform various audit tasks. However, if audit
firms use laptop computers they risk data being corrupted and appropriate controls...(Solved)
Many auditors now use laptops computers to perform various audit tasks. However, if audit firms use laptop computers they risk data being corrupted and appropriate controls must therefore be put in place to prevent the corruption of data.
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b) Explain the computer assisted audit techniques listed below:
i. Embedded audit facilities.
ii. Integrated test facilities.
c) Briefly describe two types of software that might be used by auditors in their work other than Computer Assisted Audit techniques.
d) Describe the controls that auditors should implement when using laptop computers on audits.
Date posted: February 21, 2019. Answers (1)
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Required:
a) State the audit objectives of internal controls on fixed assets.
b) Set out the audit procedures you would follow to verify directors‘ fees.
c) What procedures would you apply to verify the extension of a building that has been constructed by the client during the year?
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Your client, ABC Ltd. has a system for inputting purchase and expense invoice where the operator inputs the following from each item.
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-Supplier code number
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-Nominal account code (entered by purchase department manager) Date
-Goods inward note
-number Net amount
-VAT amount
-Gross amount
Required:
a) Suggest manual operation and controls which might previously have applied to these invoices.
b) Suggest input controls that might be applied by the program to these items.
c) List some audit tests that could be applied to these items indicating the purpose of each test and the relevant audit evidence obtained.
Date posted: February 21, 2019. Answers (1)
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The company‘s head office is in Nairobi, Kenya and if has...(Solved)
You have been the auditor of Crossborder Trading Company Ltd. for a number of years. The company‘s head office is in Nairobi, Kenya and if has considerable overseas operations. At each accounting year end, there are large debts due from overseas agents of the company (Sh. 270 million out of total debts of Sh. 680 million as at 31 December 2000). In the past, these debts have always been settled after year end but you have insisted that the debts be the subject of a specific representation made by the company‘s director.
Required:
a) Outline the purpose of a letter of representation from management to the auditor.
b) Draft a paragraph for a letter of representation appropriate to the circumstances described above.
c) Outline the audit work which should be performed when seeking evidence to substantiate the management‘s representations as drafted and indicated the value of the directors‘ representations in these circumstances. You should present your answer
under the following headings:
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- Valuation.
- Disclosure
d) State what action you would take if the directors refused to provide you with a letter of representation
Date posted: February 21, 2019. Answers (1)
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List three disadvantages of using standardized audit programmes and how these disadvantages can be avoided.
Date posted: February 21, 2019. Answers (1)
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In the course of the audit of ABC Stationers Ltd. for the year ended 30 June 2001, you have noted and recorded in the audit working papers, the following evidential matters:
1. Flowcharts of the company‘s payroll prepared by your audit assistant backed up by tests of controls.
2. An oral statement by the production director that the expected working life of plant acquired during the year is ten years.
3. A letter to the managing director from the company‘s bank manager indicating that the bank intends to extend overdraft facilities for a period of one year.
4. A list of items of inventory counted by a member of your audit team during observation of the company‘s annual stock count.
5. A letter from a customer to your firm in reply to a confirmation request indicating agreement with the balance recorded in the books of ABC Stationers Ltd.
Required:
a) With respect to each matter listed above, explain its relevance to the overall audit objective of forming an opinion and reporting on the financial statements.
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Date posted: February 21, 2019. Answers (1)
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Required:
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b) What is the importance of a preliminary review?
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Date posted: February 21, 2019. Answers (1)
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Date posted: February 21, 2019. Answers (1)
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Date posted: February 21, 2019. Answers (1)
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Date posted: February 21, 2019. Answers (1)
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Date posted: February 21, 2019. Answers (1)
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Required:
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Date posted: February 21, 2019. Answers (1)
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