QUESTION ONE
(a) You have recently been appointed as the external auditor of XYZ Ltd. Explain the stages you would take in the conduct of your audit. (4 marks)
(b) In the context of the Companies Act (Cap. 486), outline the procedure for the removal of an auditor. (6 marks)
(c) The auditor should obtain sufficient and appropriate audit evidence to be able to draw reasonable conclusions on which to base the audit opinion.
Identify and briefly explain any three procedures for obtaining audit evidence.
(6 marks)
(d) Briefly explain the meaning of the following terms in relation to audit reports:
(i) “Except for” opinion. (2 marks)
(ii) Disclaimer of opinion. (2 marks)
(Total: 20 marks)
QUESTION TWO
(a) “The auditor must not only be independent, but must be seen to be independent.” Briefly comment on this statement. (4 marks)
(b) Suggest how the independence of an auditor may be strengthened (4 marks)
(c) Explain the challenges that auditors face in the process of being independent.
(4 marks)
(d) Outline the ways in which an auditor may be held criminally liable in the course of his audit duties. (6 marks)
(e) Briefly explain what is meant by “the auditor’s duty of due professional care.”
(2 marks)
(Total: 20 marks)
QUESTION THREE
(a) The information acquired by the auditor from his client in the course of his professional work should not be disclosed to any third party except where consent has been obtained from the client.
Required:
Explain five circumstances under which an auditor can disclose such information to an appropriate authority without client’s permission (5 marks)
(b) (i) Explain the meaning of the term “audit committee” (2 marks)
(ii) List and briefly explain the main functions of an audit committee. (8 marks)
(c) Explain the purpose and principal contents of a letter of engagement (5 marks)
(Total: 20 marks)
QUESTION FOUR
(a) Identify and explain the functions of the internal audit department in an organization. (4 marks)
(b) Outline and briefly explain the procedures that the internal auditor can conduct on behalf of the external auditor. (6 marks)
(c) State the factors that the external auditor should consider before placing reliance on the work of the internal auditor. (5 marks)
(d) Briefly explain the methods which an auditor might use to ascertain a client’s internal control system. (5 marks)
(Total: 20 marks)
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