Get premium membership and access questions with answers, video lessons as well as revision papers.
The audit procedures that the auditor would carry out in regard to post balance sheet events include the following:
-Reviewing procedures management has established to ensure that subsequent events are identified and inquiring whether any such events have occurred which might affect the financial statements being reported on;
- Reading minutes of the meetings of the board of directors and audit committees held after the end of the financial period. By reading such minutes the auditor is able to identify any material subsequent events that might have occurred since this would ordinarily be discussed at these meetings;
- Review the entity‘s latest available interim financial statements and other reports such as budgets, cash flow forecasts. By reading such interim financial statements the auditor is able to identify any subsequent events;
- Inquiring from the entity‘s lawyers on litigation and legal claims against the company. This will provide further details on any developments on such litigations.;
- Inquiring from management whether any subsequent events have occurred which might affect the financial statements
Wilfykil answered the question on February 22, 2019 at 06:24
- Explain the nature and purpose of a post-audit review(Solved)
Explain the nature and purpose of a post-audit review
Date posted: February 22, 2019. Answers (1)
- Distinguish between a procedural audit and a balance sheet audit(Solved)
Distinguish between a procedural audit and a balance sheet audit
Date posted: February 22, 2019. Answers (1)
- The internal control system encompasses all the policies and procedures adopted by the
management of an entity to assist it in achieving management objectives.(Solved)
The internal control system encompasses all the policies and procedures adopted by the management of an entity to assist it in achieving management objectives.
Required:
a) Identify and explain five management objectives that an internal control system over sales aims to achieve
b) List and briefly explain five control objectives that an internal control system over sales aims to achieve
c) Explain the inherent limitations of an internal control system
Date posted: February 22, 2019. Answers (1)
- Identify and list the responsibilities of company directors in relation to the company‘s
accounting system(Solved)
Identify and list the responsibilities of company directors in relation to the company‘s
accounting system
Date posted: February 22, 2019. Answers (1)
- Explain how auditors distinguish their responsibility from those of the directors in respect of financial statements(Solved)
Explain how auditors distinguish their responsibility from those of the directors in respect of financial statements
Date posted: February 22, 2019. Answers (1)
- State the basic element of the scope paragraph of an audit report(Solved)
State the basic element of the scope paragraph of an audit report
Date posted: February 22, 2019. Answers (1)
- State the evidence, which you, as the auditor, would like to find in place and pay attention
to when vouching the following payments made by RR...(Solved)
State the evidence, which you, as the auditor, would like to find in place and pay attention to when vouching the following payments made by RR Paper Mills Ltd., during the financial year ended 31 October 2002.
a) Loans to three employees totaling Sh. 6 million.
b) The last call on 5, 000 ordinary shares at Sh, 15 per share.
c) Fire insurance premiums amounting to Sh. 10, 000 paid for the office block.
d) A loan amounting to Sh. 30 million obtained from a local bank and secured by the factory building.
e) Salesmen‘s commissions amounting to Sh. 3, 000, 000.
Date posted: February 22, 2019. Answers (1)
- What is the form of audit opinion you would give if you concluded that the
client company was experiencing going concern problems and:
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:
i. you have established that the financial statements give sufficient disclosure of the going concern problems?
ii. you have established that there is no disclosure of the going concern problems in the financial statements?
Date posted: February 21, 2019. Answers (1)
- Explain five factors which would indicate to the auditor that the going concern assumption of the business entity he is auditing is threatened(Solved)
Explain five factors which would indicate to the auditor that the going concern assumption of the business entity he is auditing is threatened
Date posted: February 21, 2019. Answers (1)
- The National Metal Works Limited manufactures and retails door and window frames. The
company recently dismissed their external auditors. The directors have approached your
firm of accountants...(Solved)
The National Metal Works Limited manufactures and retails door and window frames. The company recently dismissed their external auditors. The directors have approached your firm of accountants to act as their auditors and the directors have proposed a fee of KShs. 1,000,000 plus a bonus of 1% of profits after tax.
Required:
a) Describe the steps you would take before advising the partners of your firm whether to accept the appointment as auditors or not.
b) State with reason whether professional auditors should accept the method of remuneration as proposed by the directors of the client company.
c) Explain the implications of fixing the audit fee by negotiation between the directors and the external auditors on the independence of the auditor.
Date posted: February 21, 2019. Answers (1)
- Inspection and monitoring of quality control by a firm of auditors involves both in-house
and external procedures. The internal procedures include the post-audit review,
sometimes known as...(Solved)
Inspection and monitoring of quality control by a firm of auditors involves both in-house and external procedures. The internal procedures include the post-audit review, sometimes known as a ―cold review. The external procedures are sometimes known as ―external practice inspections or ―peer reviews
Required:
a) Write explanatory notes on the ―cold-review
b) Explain the advantages and disadvantages of the ―peer review
Date posted: February 21, 2019. Answers (1)
- Control procedures consist of practices and procedures in addition to the control
environment, established to achieve certain specific objectives. For each of the procedures
listed below, explain...(Solved)
Control procedures consist of practices and procedures in addition to the control environment, established to achieve certain specific objectives. For each of the procedures listed below, explain the purpose of the control procedures and state the tests of control you would perform to confirm that the control objective was being achieved
a) The preparation of a reconciliation statement.
b) The maintenance of a fixed assets register.
c) The existence of passwords in a micro-computer accounting system
Date posted: February 21, 2019. Answers (1)
- 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.
a) Explain six ways which auditors can use laptop computers in their audit work (other than computer-assisted audit techniques).
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)
- One of the responsibilities of the directors of a company is to establish strong internal controls to safeguard the assets of the firm.(Solved)
One of the responsibilities of the directors of a company is to establish strong internal controls to safeguard the assets of the firm.
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?
Date posted: February 21, 2019. Answers (1)
- An auditor is required to state whether, in his opinion proper books of account have
been kept and whether the financial statements give a true and...(Solved)
An auditor is required to state whether, in his opinion proper books of account have been kept and whether the financial statements give a true and fair view of the state of the financial affairs of the company being audited.
What are the consequences, to the auditor, for giving an unqualified opinion, when he knows that there are material inaccuracies in financial statements
Date posted: February 21, 2019. Answers (1)
- Your client, ABC Ltd. has a system for inputting purchase and expense invoice where the operator inputs the following from each item.(Solved)
Your client, ABC Ltd. has a system for inputting purchase and expense invoice where the operator inputs the following from each item.
-Order number (a code 2221 is used for items like electricity)
-Supplier name
-Supplier code number
-First four letters of nominal account name (entered on invoice by purchase department manager)
-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)
- 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...(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:
- Existence and title.
- 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)
- List three disadvantages of using standardized audit programmes and how these disadvantages can be avoided.(Solved)
List three disadvantages of using standardized audit programmes and how these disadvantages can be avoided.
Date posted: February 21, 2019. Answers (1)
- 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...(Solved)
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.
b) Explain your judgment on the reliability of the audit evidence obtained in five ways listed above.
Date posted: February 21, 2019. Answers (1)
- Under what circumstances is one ineligible for appointment as an auditor of a company?(Solved)
Under what circumstances is one ineligible for appointment as an auditor of a company?
Date posted: February 21, 2019. Answers (1)