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AUDIT Test 1 Chapter 1 QP

(i) The document is an exam for a Certificate in Accounting and Finance. It contains 6 questions regarding audit and assurance. (ii) The first question asks about advantages and limitations of an audit for a small company like Natasha's, and explains the differences between interim and final audits. (iii) The second question discusses reasonable assurance, the auditor's responsibility for detecting fraud, and directors' stewardship roles. (iv) The remaining questions cover IAASB standards and pronouncements, defining assurance engagements, and identifying potential independence issues for an auditor given a complex corporate structure described in one question.

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70 views2 pages

AUDIT Test 1 Chapter 1 QP

(i) The document is an exam for a Certificate in Accounting and Finance. It contains 6 questions regarding audit and assurance. (ii) The first question asks about advantages and limitations of an audit for a small company like Natasha's, and explains the differences between interim and final audits. (iii) The second question discusses reasonable assurance, the auditor's responsibility for detecting fraud, and directors' stewardship roles. (iv) The remaining questions cover IAASB standards and pronouncements, defining assurance engagements, and identifying potential independence issues for an auditor given a complex corporate structure described in one question.

Uploaded by

Zarian Nadeem
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Certificate in Accounting and Finance Stage Examination

1.5 hour – 60 marks


Additional reading time – 8 minutes

Audit and Assurance


Instructions to examinees:
(i) Answer all questions.
(ii) Answer in black pen only.
(iii) Start new question/part/subpart on new page
(iv) Write page number on top of your answer scripts.

Q.1 Natasha is operating a small company dealing in manufacturing and retail of bows and arrows,
Managing Director Miss Natasha wants to obtain a loan of 1 million from Shield Bank but
company is required to provide audited accounts as a must otherwise loan will not be
approved. Natasha is worried regarding her business and has asked your firm Barton and
Company to provide advice. If she is satisfied audit can be given to your firm. Being a corporate
advisor you are required to explain Natasha regarding following:

(a) Three Advantages and Limitations of Audit for a small company. (06)

(b) Explain Natasha the main highlights of interim and final audit. (04)

(c) Explain to her what is meant by professional skepticism, professional judgement and sufficient
appropriate audit evidence (06)

Q.2 In relation to Overall objectives of the independent auditor and the conduct of an audit in
accordance with International Standards on Auditing, discuss the appropriateness or otherwise
of the following statements:

(a) Reasonable assurance is an absolute level of assurance provided by the practitioner conclusion
expressed in a positive form or negative form or both. (03)

(b) It is main responsibility of auditor to detect and prevent fraud by designing and implementing
internal controls. (03)

(c) The directors have a stewardship role in both large and small companies (03)

Q.3 Identify the standards / pronouncements issued by IAASB along with their purposes. (06)

Q.4 Define Assurance engagement and elaborate its 5 elements (09)


Q.5 Red Limited holds 60% voting power in Black Limited. A student naming light gray have
invested 2% shares in Black Limited. Red limited and Crimson Limited holds 22% and 13%
voting power in Dark Gray Limited respectively. Mr Jet purple runs a school where light gray is
a student; subsequently you discovered that Light gray is the son of Mr Kanju, a partner in
Kanju & Co. Chartered Accountants. Black Limited also holds 30% voting power in Crimson
Limited. There are 2 government nomine directors on the board of Red Limited. Mr Jet Purple,
one of these nominee directors on the board of Red limited, is also a nominee director on the
board of Light Red limited. As Mr Kanju has to drop his 15 years son Mr Light gray daily in the
school owned by Mr Jet Purple, therefore he has started teaching in that school under
employment contract with Mr Jet Purple.

Identify with proper reasons that whether Kanju & Co Chartered Accountant can be the auditor
of following under the requirements of Companies Act 2017
A (a) Red Limited
B (b) Black limited
C (c) Crimson limited
D (d) Dark Gray Limited
E (e) Light Red Limited (15)

Q.6 Under the Companies Act, 2017 identify five situations in which the Commission may appoint a
person to fill the vacancy of an auditor. (05)
(THE END)

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