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FINAL EXAMINATIONS JUNE 2011

COURSE CODE AND NAME: DATE AND TIME: ACC 210 PRINCIPLES OF AUDITING

TUESDAY 7TH JUNE, 2011 (9:00AM 12:00NOON)

DURATION OF EXAMINATION: THREE (3) HOURS __________________________________________________________________________ INSTRUCTION TO CANDIDATES: 1. Follow carefully all instructions in the examination booklet. 2. Read all questions carefully. 3. Answer four questions. 4. Begin each answer on a new page. 5. DO NOT write your name on the examination booklet.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

QUESTIONS

Answer any four (4) questions.

1. (a) There may be several indications of the existence of irregularities in an organization. Give at least (10) possible indications which the auditor might be concerned about. (10 marks) (b) The Auditor will be concerned if he should find evidence of the existence of irregularities. State at least (5) actions to be taken by the Auditor on the discovery of potential errors or regularities when conducting their audit. (10 marks) (c) Different reports are sent by the auditor concerning his findings of weaknesses and irregularities in an organization when the auditor does an audit. Identify who gets which report. (5 marks)

2. (a) When considering the amount in the Provision for Bad and Doubtful Debts the auditor will make an evaluation of the adequacy of the Provision. What are some of the factors the auditor will take into consideration? (10 marks) (b) How will the Auditor go about verifying loans to directors and connected persons? (10 marks) (c) There are various methods and techniques that can be used for Debtors circularization. Please explain the following: i) Direct external evidence technique ii) Negative method iii) Positive method (5 marks) 3. (a) List some of the verification procedures/general principles that the Auditor may use for Liabilities. (10 marks)

(b) Auditors need to be satisfied that all liabilities recorded in the books are correct and are incorporated in the final accounts. However the auditor must also be satisfied that there are no other liabilities which for various reasons are not recorded. Give examples of unrecorded liabilities that the Auditor may want to know about. (10 marks)

Cipriani College of Labour & Co-operative Studies

ACC 210

June 2011

(c) There are some inherent uncertainty involving estimating the outcome of legal actions taken against an entity, what procedure can the Auditor follow to verify the existence of these legal matters? (5 marks)

4. (a) Directors make certain assertions when producing the financial Statements. What are those assertions? (10 marks) (b) Audiators collect evidence from a variety of sources list 10 of these sources of evidence. (10 marks) (c) The use of a representative sample of each type of transaction is a method used by auditors to obtain audit evidence, this is referred to as test checking. What are the factors that influence the size of the sample? (5 marks) 5. (a) Compare and contrast the work of the Internal & External Auditor. (10 marks) (b) Before placing any reliance on the work of the Internal Auditor, the External Auditor must do an assessment on the Internal Auditors work. How will the External Auditor go about doing this assessment? (10 marks) (c) Auditors and accountant need to minimise their potential liability for professional negligence by using various means give at least 5 of them. (5 mark)

END OF QUESTION PAPER

Cipriani College of Labour & Co-operative Studies

ACC 210

June 2011