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QUESTION 1 The engagement Partner of Ahomka Wo Mu & Co Chartered Accountants has asked you to lead the planning of the

audit of Never Say Die Company Limited for the year ending 31st December 2006. Never Say Die Limited has been experiencing fluctuating fortunes in its operations over the past five years. Required: (a) (b) (c) What factors will guide you in setting materiality levels (audit gauge) for planning purposes? (5 marks) Explain the factors which will help you to determine your firms degree of reliance on the clients internal control during the conduct of the audit. (10 marks) Describe the type of audit software that the auditor can use to collect audit evidence without being present when transactions are being processed. (5 marks) Total: 20 marks

QUESTION 2 It is essential that an audit firm should organize its affairs in such a way as to minimize the risk of paying damages to clients or others arising out of negligent work. Required: (a) What features would you incorporate in your audit firm to minimize risk especially against the backdrop of the recent international audit scandals involving reputable organizations? (10 marks) List the organizational procedures that your audit firm must adopt to ensure that audits are performed to meet quality control standards. (10 marks) Total: 20 marks

(b)

QUESTION 3 In auditing the financial statements of companies which use computerized accounting systems, the auditors may find that this traditional audit trail is often obscured. Various techniques can be used in order to give the auditors greater assurance when the audit trail is lost. These methods will include auditing through the computer coupled with detailed analytical procedures. Required: (a) Explain why there is possible loss of audit trail when companies utilize computerized accounting systems, and why auditing through the computer assists the auditors in overcoming this loss of audit trail. (5 marks) Explain how the auditors can use analytical procedures in order to give them greater assurance when there is a loss of audit trail. (5 marks) Outline how audit software can be used by the auditors in order to assist them in carrying out their analytical procedures. (5 marks) Explain the possible reasons and audit implications of significant changes in the following ratios when compared with the prior years ratios: i) ii) The stock turnover ratio has decreased from the previous years rate. The debtors turnover ratio has decreased over the year. (5 marks) Total: 20 marks

(b)

(c)

(d)

QUESTION 4 (a) You are the auditor of Excellent Holding Company Ltd which has subsidiaries in Ghana and in some West African countries, many of which are audited by other auditing firms. All subsidiaries are involved in the manufacture or distribution of alcoholic beverages and have accounting periods coterminous with the parent/holding company.

Required: 2

State the reasons why you would wish to review the work of the auditors of the subsidiaries not audited by you and to detail the work you would wish to carry out in performing such a review. (b) (16 marks) It is not uncommon for two or more firms of accountants to act as joint auditors. This situation could occur for a number of reasons. Adduce any four (4) of these reasons. (4 marks) Total: 20 marks

QUESTION 5 Ahamatrofo Ltd, a renowned mobile phone company has embarked on a restructuring exercise with a strategy to become a market leader in the provision of mobile phone services. In recent times the companys performance has not been satisfactory. The expected benefits of the restructuring exercise are that the company will operate on a lower cost base. The Managing director, Mr. Tarbor, has directed the Finance Director to present a copy of the companys interim report for the year ending December 2007 and the profit forecast and budgeted balance sheet for 2008 to the firm of Accountants, Winners & Associates Chartered Accountants of which you are the audit manager. The Balance Sheet and Income Statement are as follows: Interim Dec 2007 billion 100 110 40 70 20 340 60 280 70 210 50 40 120 210 Budgeted Dec 2008 billion 80 90 30 60 10 270 40 230 70 160 50 40 70 160 3

Fixed Assets Intangible Assets Inventory Debtors Cash Current Liabilities Creditors Long-term liabilities 5% Debentures Representing; Stated capital Capital surplus Income surplus

Total turnover Net operating profit before interest Tax Required: (a)

170 15

280 35

State the matters which a Professional Accountant will consider when examining the accounting policies, calculations for the Profit Forecast and the procedures followed by the company in the preparation of the Profit Forecast. (5 marks) State and explain the procedures which Winners & Associates Chartered Accountants should undertake in order to provide a report on the forecast Balance Sheet of Ahamatrofo Ltd as at 31 December 2008 to Mr. Tarbor. (5 marks) Yiadom Kwapong is a fresh graduate from one of the leading universities in the country. He has just been recruited by Nyamepe and Co Chartered Accountants. On his third day of reporting to office the staff partner of Nyamepe Co Chartered Accountants directed you to brief Yiadom about fraud investigation because there is a pending investigation to be conducted in a clients office.

(b)

(c)

Required: Briefly state the stages of Fraud Investigation and content of investigation report. (10 marks) Total: 20 marks

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