a) Loan to three employees
- Proper authorization for the loan by the responsible official and in accordance with company policy.
- Supporting evidence as to whether the employees are bonafide employees of the organization.
- A repayment schedule of the loans. The period of repayment should not exceed the employees term of office
- Security given by the employees to secure the loan.
- Evidence to satisfy himself that the debt is good and recoverable at the balance sheet date. This will include evidence of repayments by the employee.
-Interest on the loan should be charged on normal commercial basis or where there is a concession that this is within the company‘s policy
(b) Last call on 5,000 ordinary shares at sh.15 per share.
- Verify that the call has been made in accordance with the terms of the issue.
- Inspect paid cheques for cash paid on the last call.
- Inspect any cancelled share certificates for which the company never honoured the last call.
- Verify that proper authority was obtained to make the payment
(c) Fire premiums
- Examine policy documents issued by the insurance company to make sure that the policy relates to the office block.
- Verify the receipt issued by the insurance company to ascertain that the amount paid was indeed sh.10, 000.00
- Ensure that the policy covers the office block against fire adequately i.e. it has not been over or under insured.
- Verify that amount paid in current year compares favourably with the previous years.
(d) Loan amounting to Sh.30 million
- Go through the board of directors‘ minutes to ensure that the loan was acquired with proper authority from the board.
- Ensure that the loan was obtained on behalf of R R Paper Mills and not for a third party. To determine this, seek evidence regarding the utilization of the money within the company.
- Verify that the loan was utilised for the approved purpose
- Determine whether the loan is being properly serviced in terms of interest and principal repayments. If no, consider the impact of the consequences of default to R Paper Mills, e.g. sale of the security, possible liquidation (hence no longer a going concern).
(e) Salesman?s commissions amounting to Sh.3,000,000
Seek evidence that the salesmen are authorized to sell the company‘s products. Their names should appear in the records for salesmen.
- Verify the terms of payment of commission. There should be a clearly laid down policy for the payment of commissions.
- Ensure that commissions are only paid against proof of sale.
- Ensure that commission paid is subjected to taxes as required by the law.
Wilfykil answered the question on February 22, 2019 at 05:33
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i. you have established...(Solved)
What is the form of audit opinion you would give if you concluded that the client company was experiencing going concern problems and:
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Required:
a) Describe the steps you would take before advising the partners of your firm whether to accept the appointment as auditors or not.
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b) Explain the computer assisted audit techniques listed below:
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ii. Integrated test facilities.
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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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Required:
a) Suggest manual operation and controls which might previously have applied to these invoices.
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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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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.
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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:
a) Explain the preliminary procedures you would carry out upon your appointment.
b) What is the importance of a preliminary review?
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Date posted: February 21, 2019. Answers (1)
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Required:
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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.
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Date posted: February 21, 2019. Answers (1)