AUDITING

Topics: Audit, Internal control, Auditing Pages: 3 (721 words) Published: February 27, 2014
Q1
(a) Highlight four control objectives that would be essential in a sales cycle

(b) Outline three tests of control that should be performed by an auditor in each of the following areas: i. Cash receipts
ii. Cash payments
iii. Bank reconciliations

(c) Summarize seven sources of internal control risks that have an impact on the financial reporting framework in an organization.

Q2
(a) Outline four audit procedures you would carry out to verify the following items: i. Leased property
ii. Goodwill

(b) Makau and Associates, an accounting firm, are the auditors of Eastview Petroleum Ltd. For the year ended 31 December 2012. You are a member of the audit team and the following information relates to the client:

1. The company has six petrol stations located in different parts of the country and has a head office in the capital city. 2. Each petrol station sells fuel. In addition, each petrol station has car wash services, a garage, a retail shop for motor accessories and a restaurant. 3. All petrol stations have point of sale micro-computers which are linked to the main computer at the head office.

Required:
i. Identify six risk areas that your firm would consider when developing the audit plan ii. Describe three analytical review procedures you would carry out as part of the substantive testing on the area of sales.

Q3
(a) Briefly explain why professional skepticism is important to an auditor (b) The ability of auditors to assess inherent risks improves the efficiency of the audit process Required:
i. Explain four factors that affect inherent risks at the entity level. ii. State four factors that affect inherent risks at the account balance and class of transactions level. (c) Explain five components of an internal control system.

Q4
(a) A number of engineers own Mkwasi Ltd. The Articles of Association of Mkwasi Ltd. Stipulate that “The auditors of the company shall hold office for four years”. The directors of the company...
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