TUESDAY: 5 December 2023. Afternoon Paper. Time Allowed: 3 hours.
Answer ALL questions. Marks allocated to each question are shown at the end of the question. Do NOT write anything on this paper.
QUESTION ONE
1. Identify FIVE advantages of undertaking an audit exercise by an organisation. (5 marks)
2. It is the responsibility of the directors of a company to prepare financial statements that are presented to the shareholders upon the completion of the audit process.
Required:
Apart from shareholders, describe FOUR other users of audited financial statements. (4 marks)
3. Explain the following components of audit risks:
Control risks. (2 marks)
Detective risks. (2 marks)
Inherent risks. (2 marks)
4. The directors of Tuliko Company Ltd. have approached you with the intentions of appointing your firm as their auditors for the next financial year. They have not given any reason for their desire to replace the current auditor except that they criticise his quality of work and feel that they are not getting value for their money.
Required:
Analyse FIVE reasons why you should communicate with the previous auditor before accepting the new
appointment from the directors of Tuliko Company Ltd. (5 marks)
(Total: 20 marks)
QUESTION TWO
1. An audit software refers to a computer program developed to assist auditors in the conduct of their audit work.
Required:
Describe FOUR types of software that the auditor may use in obtaining audit evidence to support his conclusions in the audit of a computerised accounting system. (8 marks)
2. An internal control system is essential to every form of business. It is crucial to an effective financial accounting system and helps the auditor in assessing risk of material misstatement in the financial statements. The auditor has a responsibility to test the existence and effectiveness of the internal control system as part of the audit process.
Required:
Discuss THREE methods that the auditor might use in order to ascertain that the internal control system of a client is working. (6 marks)
3. List SIX advantages of audit working papers. (6 marks)
(Total: 20 marks)
QUESTION THREE
1. Explain THREE types of audit opinions. (6 marks)
2. Discuss THREE types of errors that are likely to be committed during the preparation of financial statements of an organisation. (6 marks)
3. Define the term “interim audit”. (2 marks)
Anita Jones is one of the directors of Bestfoods Ltd., a company that you audit. Anita does not find the
need to conduct an interim audit. She states that, it is only a way of increasing audit fees and that it adds no value to the company.
Required:
Explain to Anita Jones THREE benefits that Bestfoods Ltd. will enjoy from carrying out an interim audit. (6 marks)
(Total: 20 marks)
QUESTION FOUR
1. Highlight FOUR factors that could increase the detection of risk in the course of auditing. (4 marks)
2. Explain FOUR methods that an auditor could use in gathering audit evidence. (8 marks)
3. Working papers are the record of the work done by the auditor. However, they do not contain everything that the auditor does. The content and form of the working papers are dependent on the auditor’s judgement.
Required:
Enumerate FIVE factors that could guide the auditor in deciding the content and nature of his working papers. (5 marks)
4. Outline THREE components of an internal control system. (3 marks)
(Total: 20 marks)
QUESTION FIVE
1. Explain the term “money laundering”. (2 marks)
Describe THREE stages in a money laundering scheme. (6 marks)
2. Explain SIX rights of an auditor. (12 marks)
(Total: 20 marks)