1. Relevant audit evidence
It depends on whether it assists the auditor to form an opinion on some aspect of the financial statements. For example evidence that indicates that a recorded asset exists is relevant to audit objectives.
2. Reliable audit evidence
Reliability of audit evidence can be assessed to some extent on the following presumptions:
•• Documentary evidence is more reliable than oral evidence.
•• Evidence from outside the enterprise is more reliable than that secured solely from within the enterprise.
•• Evidence originated by auditor by such means as analyzing and physical inspection is more reliable than evidence obtained from others.
•• Evidence for a figure in accounts is usually obtained from several sources. The cumulative effect of several evidential sources which give a consistent view is greater than that from a single source.
•• Original documents are more reliable than photocopies or facsimiles.
Wilfykil answered the question on April 12, 2019 at 10:19
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Date posted: April 12, 2019. Answers (1)
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The responsibilities of internal and external auditors in relation to the risk of fraud and error differ.
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Date posted: April 12, 2019. Answers (1)
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Date posted: April 12, 2019. Answers (1)
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Required:
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Date posted: April 12, 2019. Answers (1)
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and similar items via two divisions: mail order and on-line...(Solved)
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and similar items via two divisions: mail order and on-line ordering on the Internet. Parker is a
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The company’s turnover is in excess of Kshs85 million with net profits of Kshs4 million. All profits
are currently earned in the mail order division, although the Internet division is expected to return
a small net profit next year. Turnover is growing at the rate of 20% p.a. Net profit has remained
almost the same for the last four years. In the next year, the directors plan to expand the range of
goods sold through the Internet division to include toys, garden furniture and fashion clothes. The
directors believe that when one product has been sold on the Internet, then any other product
can be as well.
The accounting system to record sales by the mail order division is relatively old. It relies on
extensive manual input to transfer orders received in the post onto Parker’s computer systems.
Recently errors have been known to occur, in the input of orders, and in the invoicing of goods
following dispatch. The directors maintain that the accounting system produces materially
correct figures and they cannot waste time in identifying relatively minor errors. The company
accountant, who is not qualified and was appointed because he is a personal friend of the
directors, agrees with this view, The directors estimate that their expansion plans will require a
bank loan of approximately Kshs30 million, partly to finance the enhanced web site but also to
provide working capital to increase inventory levels. A meeting with the bank has been scheduled
for three months after the year end. The directors expect an unmodified auditor’s report to be
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Required:
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Date posted: April 12, 2019. Answers (1)
- Ajio is a charity whose constitution requires that it raises funds for educational projects. These
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Ajio is a charity whose constitution requires that it raises funds for educational projects. These
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country from which Ajio operates have recently become subject to new audit and accounting
regulations. Charity income consists of cash collections at fund raising events, telephone
appeals, and bequests (money left to the charity by deceased persons). The charity is small
and the trustees do not consider that the charity can afford to employ a qualified accountant.
The charity employs a part-time bookkeeper and relies on volunteers for fund raising. Your firm
has been appointed as accountants and auditors to this charity because of the new regulations.
Accounts have been prepared (but not audited) in the past by a volunteer who is a recently
retired Chartered Certified Accountant.
Required:
Describe the risks associated with the audit of Ajio under the headings inherent risk, control risk and detection risk and explain the implications of these risks for overall audit risk
Date posted: April 12, 2019. Answers (1)
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List and explain the audit tests to be performed on income and expenditure from fund raising events.
Date posted: April 12, 2019. Answers (1)
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ISA 400 (Risk Assessments and Internal Control) deals with internal control objectives and
internal controls. ISA 500 (Audit Evidence) deals with audit objectives and audit procedures. A
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business and are able to effectively plan and execute tests of controls and an appropriate level
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You are the auditor of a small manufacturing company, Dinko, that pays its staff in cash and by
bank transfer and maintains its payroll on a small stand-alone computer.
Required:
(a) For the payroll department at Dinko, describe the:
i. Internal control objectives that should be in place.
ii. Internal control environment and internal control procedures that should be in place to achieve the internal control objectives.
(b) For the payroll charges and payroll balances (including cash) in the financial statements of Dinko:
i. Describe the external auditor audit objectives.
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Date posted: April 12, 2019. Answers (1)
- Rhapsody Co supplies a wide range of garden and agricultural products to trade and domestic
customers. The company has 11 divisions, with each division specializing in...(Solved)
Rhapsody Co supplies a wide range of garden and agricultural products to trade and domestic
customers. The company has 11 divisions, with each division specializing in the sale of specific
products, for example, seeds, garden furniture, and agricultural fertilizers. The company has an
internal audit department which provides audit reports to the audit committee on each division
on a rotational basis.
Products in the seed division are offered for sale to domestic customers via an Internet site.
Customers review the product list on the Internet and place orders for packets of seeds using
specific product codes, along with their credit card details, onto Rhapsody Co’s secure server.
Order quantities are normally between one and three packets for each type of seed. Order details
are transferred manually onto the company’s internal inventory control and sales system, and
a two part packing list is printed in the seed warehouse. Each order and packing list is given a
random alphabetical code based on the name of the employee inputting the order, the date, and
the products being ordered.
In the seed warehouse, the packets of seeds for each order are taken from specific bins and
dispatched to the customer with one copy of the packing list. The second copy of the packing list
is sent to the accounts department where the inventory and sales computer is updated to show
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is marked as completed confirming that the order has been dispatched and payment obtained.
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a) In respect of sales in the seeds division of Rhapsody Co, prepare a report to be sent to the
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Date posted: April 12, 2019. Answers (1)
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Date posted: April 12, 2019. Answers (1)
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The time is now towards the end of the audit, and you are reviewing working papers produced by the audit team. An example of a working paper you have just reviewed is shown below.
Client Name Specs4You Co
Working paper Payables transaction testing
Year end 30 April 2007
Prepared by ……………………..
Reviewed by ……………………
Audit assertion: To make sure that the purchases day book is correct.
Method: Select a sample of 15 purchase orders recorded in the purchase order system. Trace
details to the goods received note (GRN), purchase invoice (PI) and the purchase day book
(PDB) ensuring that the quantities and prices recorded on the purchase order match those on
the GRN, PI and PDB.
Test details: In accordance with audit risk, a sample of purchase orders were selected from
a numerically sequenced purchase order system and details traced as stated in the method.
Details of items tested can be found on another working paper.
Results: Details of purchase orders were normally correctly recorded through the system. Five
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Required:
Explain why the working paper shown above does not meet the standards normally expected of
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Date posted: April 12, 2019. Answers (1)
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Date posted: April 12, 2019. Answers (1)
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Date posted: April 12, 2019. Answers (1)
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Date posted: April 12, 2019. Answers (1)
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Date posted: April 12, 2019. Answers (1)
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Date posted: April 12, 2019. Answers (1)
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for the last five years, to the current level of Kshs50 million. Net profits are also high, with an
acceptable return being provided for the four shareholders. The internal audit department was
established last year to assist the board of directors in their control of the company and to
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the principles of good corporate governance with respect to internal audit. However, he is also
aware that the other board members do not have complete knowledge of corporate governance
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Required:
Write a memo to the board of ZX that:
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Date posted: April 12, 2019. Answers (1)
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Date posted: April 12, 2019. Answers (1)
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Date posted: April 12, 2019. Answers (1)
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Date posted: April 12, 2019. Answers (1)