SECTION B
Answer any Two Questions from this section
Question 1
A. Describe the auditor’s responsibility in relation to subsequent
events. occurring between the date of the statement of financial
position and the date the auditor signs his/her report (Reference:
ISA 560 ‘Subsequent Events’). [6 Marks)
B. Distinguish between the following forms of modified audit
report: [6 Marks]
i. Qualified Opinion
ii. Disclaimer of Opinion
iii. Adverse opinion
C. You are the audit manager assigned to the audit of the 2021
financial statements of an existing client, ORS PIe. The audit work
has been completed by the engagement team and you have reviewed
the working papers. You have concluded that the financial
statements are devoid of material misstatement, they are fairly
presented, relevant financial reporting standards have been applied
and all relevant legislations have been complied with.
Required:
Draft an appropriate independent auditor’s report to be included in the
annual report and financial statements to be circulated to members.
Note: The format and content should be in line with the prescription of
ISA 700 ‘The Independent Auditor’s Report on a Complete Set of
General. Purpose Financial Statements’ [8 Marks]
Question 2
A. Define “joint audit’, and assess the advantages and disadvantages of
an audit being conducted on a ‘joint basis’. [6 Marks]
B. It is management’s responsibility to ensure that the entity’s
operations are conducted in accordance with laws and
regulations. The responsibility for the prevention and detection
of noncompliance rests with management.
Required
As an external auditor of a company, describe four
policies/procedures that you would recommend to the client to
assist management in discharging its responsibilities for the
prevention and detection of non-compliance with laws and
regulations. [8 Marks]
C. Describe four ways in which fraudulent financial reporting
could be perpetrated by employees of a client company. [6 Marks]
Question 3
While making arrangements to start the final audit work of Grace
Plc, the financial accountant of the company informs you that the
company has acquired a new accounting software to process
transactions and to prepare financial statements. According to the
accountant, the sales engineer of the software developer had run a
demonstration which seemed to show that the introduction of the
computerized accounting system would cause very few problems.
However while you are carrying out the final audit tests, you are
informed that the computerized accounting data cannot be accessed.
You further discover that the data disks have been corrupted , either
because of a malfunction in the software or because of a user error.
Required:
A. Describe the audit implications of the introduction of the
computerized accounting system in the period between the
interim audit visit and the year-end date. [6 Marks]
B. Describe the controls which the company should have installed
in order to ensure that this corruption of the data files did not
cause a major accounting breakdown. [8 Marks]
C. Describe the audit implications in the year that the corruption of
data files has taken place, assuming that the company has not
maintained adequate safeguards over computer generated data. [6 Marks]
Question 4
A. Discuss three problems that may be faced in implementing quality
control procedures in a small firm of Chartered Accountants, and
recommend how these problems may be overcome [6 Marks]
B. An audit firm should establish policies and procedures designed
to provide it with reasonable assurance that the firm and its
personnel comply with relevant ethical requirements.
Required:
Explain any four fundamental principles of professional ethics a
firm and its personnel should comply with.
[Reference: IFAC Code of Ethics for Professional Accountants]
[8 Marks]
C. Audit review responsibilities are determined on the basis that
more experienced engagement team members, including the
engagement partner, review work performed by less
experienced team members.
Required
Identify any six issues that senior audit team members consider
or look out for when carrying out review of work performed by
junior team members. [6 Marks]
