QUESTION ONE
(a) 1) Define the term “assurance engagement” (2 marks)
2) Describe four ways in which an audit engagement differs from an assurance engagement
(8 marks)
(b) Highlight the advantages of outsourcing the internal audit function of a company (10 marks)
QUESTION TWO
(a) With respect to the code of ethics for professional accountants, explain the importance of the following fundamental principles: (8 marks)
1) Integrity
2) Objectivity
3) Confidentiality
4) Professional ethics
b) The conceptual approach to independence requires an auditor to have independence of mind and independence in appearance.
REQUIRED:
1) Differentiate between “independence of mind” and “independence in appearance” (4 marks)
2) Citing suitable examples, explain four circumstances that could pose threats to an auditor’s independence (8 marks)
QUESTION THREE
Equity Investment Group is a company listed in the National Stock Exchange. It has two main functional divisions namely; the Investment division and the Insurance division. Due to the nature of the company’s transactions, the directors were of the opinion that they should form an audit committee and an internal audit function to oversee the internal control systems of the company.
The auditors of the group, PK Associates (Certified Public Accountants), are in the process of establishing the overall audit strategy which will set the scope, timing and direction of the audit.
REQUIRED:
(a) Describe some of the matters that would be included in the overall audit strategy of the Equity Investment Group (10 marks)
(b) State five matters the auditors of Equity Investment Group should discuss during their engagement team meeting (5 marks)
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