MODULE CODE: ABF200 TITLE OF PAPER: Auditing EXAM QUESTIONS FOR REVISION

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. What are the criteria that must be met for a company to be exempt from audit? (3 marks) 2. Analytical review is mandatory during the course of the audit. Give two ways analytical review can be us ... ed during the audit. (2 marks) 3. ISA 300 explains that it is important to plan to ensure that the audit is carried out in an effective manner. State six issues to be considered as part of the planning process. (3 marks) 4. Give three key differences between internal and external audits. (3 marks) 5. Explain the following terms: Inherent risk Control risk Detection risk (3 marks) 6. What is the difference between an audit strategy and the audit plan? ou are planning the audit of Norb Ltd. Norb Limited is a company based in Cornwall which designs and builds yachts. It also has a small yard in Scotland which it purchased recently. Most of the yachts are built to customer specification. However, as trade has been slack recently, the company is building some yachts without orders in the hope of obtaining buyers when the market picks up. Most of the company’s output is for export and it quotes its prices in US dollars. You are asked to act as senior in charge of the audit. The company has a year end 30 September. It is apparent from the previous year’s audit file that the company has always had weak internal controls. The company is currently amending its designs to take advantage of new technology and has invested considerable time and money in this. Consequently, it is heavily indebted to the bank. The bank overdraft facility is to be reviewed in November 2009 and the managing director wishes to ensure the continuing availability of the overdraft facility before attending a major trade fair in late November 2009. (b) Use the information above to prepare a planning memorandum for the audit partner detailing the issues and audit risks that need to be taken into account when planning the audit of Norb Ltd. Detail any further information that you will need to obtain in order to plan the audit effectively. (14 marks) 5. International Auditing Standard 260 ‘Communication of audit matters with those charged with governance’ requires the auditor to communicate matters of governance interest arising from the audit to the directors of the company (or other relevant people). One such communication is the Letter of Comment or Management Letter. Task: (a) What are the principal purposes of this communication and how can the auditor ensure the letter is as effective as possible when reporting to management? (5 marks) The purpose of an audit is to gather sufficient and appropriate audit evidence to support or otherwise the assertion that the financial statements show a true and fair view and are free from material mis-statement. If this assertion has been satisfied then an unqualified audit report may be issued. If it is not satisfied then a modified report must be issued. (b) Explain how the basis of opinion paragraph in the unqualified report demonstrates to the reader that the audit is not 100% assurance that the financial statements are accurate. (5 Marks)ABF200 6 (c) Explain briefly in what circumstances the following audit reports may be necessary: (i) Qualified ‘except for’ (ii) Disclaimer (iii) Adverse [Show More]

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