Which of the following is a substantive audit procedure for wages and salaries?
A.Inspect a sample of clock cards for evidence of authorisation by a responsible official
B.Recalculate a sample of payroll deductions such as employment taxes to confirm accuracy
C.Attempt to access and make changes to the payroll master file using the log on for a junior clerk
第1题
ding the Entity and Its Environment describes the five components of an entity’s internal control.
Required:
Identify and briefly explain the FIVE components of an entity’s internal control. (5 marks)
(b) Bonsai Trading Co (Bonsai) manufactures electrical equipment, and its year end is 30 September 2015. You are the audit supervisor of Poplar & Co and are developing the audit programmes for the forthcoming interim audit. The company’s internal audit department has provided you with documentation relating to the non-current assets cycle including the related controls listed below.
– Bonsai has a capital expenditure committee and all purchase orders for capital items are required to be authorised by this committee.
– On receipt, each asset is assigned a unique serial number and this is recorded on the asset and in the non-current assets register.
– When the asset arrives, a goods received note (GRN) is completed which details the nature of the expenditure (i.e. whether it is capital or revenue), and the GRN classification is reviewed and initialled by a responsible official. Copies of the GRNs relating to capital expenditure are then submitted to the finance department for updating of the non-current assets register.
– Periodically, internal audit undertakes a review of assets in the register and compares them to assets on site, using the serial number to confirm existence of the asset.
– Access to the non-current assets register is restricted through passwords to a small number of staff in the finance department.
Required:
Describe a test of control which the auditor of Bonsai Trading Co would perform. to assess whether or not each of the non-current asset controls listed above is operating effectively. (5 marks)
第2题
if any, is/are correct?
(1) International Standards on Auditing (ISAs) are issued by the International Accounting Standards Board (IASB) and provide guidance on the performance and conduct of an audit
(2) In the event that ISAs differ from local legislation in a specific country, auditors must comply with the requirements of the ISAs
A.1 only
B.2 only
C.Both 1 and 2
D.Neither 1 nor 2
第3题
on-current assets?
A.Select a sample of assets included in the non-current asset register and physically verify them at the client premises
B.Review the repairs and maintenance expense account to identify any items of a capital nature
C.For assets disposed of, agree the sale proceeds to supporting documentation and cash book
第4题
d?
A.Recalculation involves the auditor’s independent execution of procedures or controls which were originally performed as part of the entity’s internal control
B.Confirmation consists of seeking information of knowledgeable persons, within the company or outside the company
C.Reperformance consists of checking the mathematical accuracy of documents or records
D.Observation consists of looking at a procedure or process being performed by others
第5题
ansactions and events for the year under audit; and
(ii) For each identified assertion, describe a substantive procedure relevant to the audit of REVENUE. (8 marks)
(b) Hawthorn Enterprises Co (Hawthorn) manufactures and distributes fashion clothing to retail stores. Its year end was 31 March 2015. You are the audit manager and the year-end audit is due to commence shortly. The following three matters have been brought to your attention.
(i) Supplier statement reconciliations
Hawthorn receives monthly statements from its main suppliers and although these have been retained, none have been reconciled to the payables ledger as at 31 March 2015. The engagement partner has asked the audit senior to recommend the procedures to be performed on supplier statements. (3 marks)
(ii) Bank reconciliation
During last year’s audit of Hawthorn’s bank and cash, significant cut off errors were discovered with a number of post year-end cheques being processed prior to the year end to reduce payables. The finance director has assured the audit engagement partner that this error has not occurred again this year and that the bank reconciliation has been carefully prepared. The audit engagement partner has asked that the bank reconciliation is comprehensively audited. (4 marks)
(iii) Receivables
Hawthorn’s receivables ledger has increased considerably during the year, and the year-end balance is $2·3 million compared to $1·4 million last year. The finance director of Hawthorn has requested that a receivables circularisation is not carried out as a number of their customers complained last year about the inconvenience involved in responding. The engagement partner has agreed to this request, and tasked you with identifying alternative procedures to confirm the existence and valuation of receivables. (5 marks)
Required:
Describe substantive procedures you would perform. to obtain sufficient and appropriate audit evidence in relation to the above three matters.
Note: The mark allocation is shown against each of the three matters above.
第6题
completely and accurately invoiced?
(1) Good despatched notes are matched to sales invoices
(2) Sales invoices are sequentially numbered
(3) Sales invoices are matched to customer orders
(4) Regular review of unfulfilled orders
A.1 and 2
B.2 and 4
C.2 and 3
D.1 and 4
第7题
e PLANNING stage of the audit are correct?
(1) Analytical procedures are useful when forming an overall conclusion as to whether the financial statements are consistent with the auditor’s understanding of the company
(2) Analytical procedures can be used to obtain relevant and reliable audit evidence
(3) Analytical procedures can assist in identifying the risks of material misstatement
(4) Analytical procedures can assist in identifying unusual transactions and events
A.1 and 2
B.2 and 3
C.3 and 4
D.2 and 4
第8题
end was 31 July 20X6 and the draft profit before tax is $13·6 million. You are the audit supervisor and the year-end audit is due to commence shortly. The following matters have been brought to your attention.
(i) Revaluation of property, plant and equipment (PPE)
At the beginning of the year, management undertook an extensive review of Elounda Co’s non-current asset valuations and as a result decided to update the carrying value of all PPE. The finance director, Peter Dullman, contacted his brother, Martin, who is a valuer and requested that Martin’s firm undertake the valuation, which took place in August 20X5. (5 marks)
(ii) Inventory valuation
Your firm attended the year-end inventory count for Elounda Co and ascertained that the process for recording work in progress (WIP) and finished goods was acceptable. Both WIP and finished goods are material to the financial statements and the quantity and stage of completion of all ongoing production was recorded accurately during the count.
During the inventory count, the count supervisor noted that a consignment of finished goods, compound E243, with a value of $720,000, was defective in that the chemical mix was incorrect. The finance director believes that compound E243 can still be sold at a discounted sum of $400,000. (6 marks)
(iii) Bank loan
Elounda Co secured a bank loan of $2·6 million on 1 October 20X4. Repayments of $200,000 are due quarterly, with a lump sum of $800,000 due for repayment in January 20X7. The company met all loan payments in 20X5 on time, but was late in paying the April and July 20X6 repayments. (4 marks)
Required:
(a) Describe substantive procedures you should perform. to obtain sufficient, appropriate audit evidence in relation to the above three matters.
Note: The mark allocation is shown against each of the three matters above.
(b) Describe the procedures which the auditor of Elounda Co should perform. in assessing whether or not the company is a going concern. (5 marks)
第9题
re an audit supervisor of Spinalonga & Co and are currently preparing for the forthcoming interim and final audit for the year ending 31 October 20X6. You are required to document and assess the sales system, recommend control improvements to deal with a specific fraud issue as well as undertake substantive testing of revenue.
Sales ordering, goods despatched and invoicing
Heraklion Co sells footballs to a range of large and small sports equipment retailers in several countries. Sales are made through a network of sales staff employed by Heraklion Co, but new customer leads are generated through a third party company. Sales staff are responsible for assessing new customers’ creditworthiness and proposing a credit limit which is then authorised by the sales director. The sales staff have monthly sales targets and are able to use their discretion in granting sales discounts up to a maximum of 10%. They then record any discount granted in the customer master data file.
The sales staff visit customer sites personally and orders are completed using a two-part pre-printed order form. One copy is left with the customer and the other copy is retained by the sales person. The sales order number is based on the sales person’s own identification (ID) number.
The company markets itself on being able to despatch all orders within three working days. Once the order is taken, the sales person emails the finance department and warehouse despatch team with the customer ID and the sales order details and from this a pick list is generated. Sequentially numbered goods despatched notes are completed and filed in the warehouse.
Sequentially numbered invoices are generated using the pick lists for quantities and the customer master data file for prices. Standard credit terms for customers are 30 days and on a monthly basis sales invoices which are over 90 days outstanding are notified to the relevant sales person to chase payment directly with the customer.
Payroll fraud
The finance director, Montse Mirabelle, has informed you that a significant fraud took place during the year in the payroll department. A number of fictitious employees were set up on the payroll and wages were paid into one bank account. This bank account belonged to two supervisors, who were married, and were employed by Heraklion Co. One had sole responsibility for setting up new joiners in the payroll system and the other processed and authorised bank transfer requests for wages and supplier payments. These employees no longer work for the company and Montse has asked the audit firm for recommendations on how to improve controls in this area to prevent this type of fraud occurring again. Heraklion Co operates a Human Resources department.
Required:
(a) Describe TWO methods for documenting the sales system, and for each explain ONE advantage and ONE disadvantage of using this method. (6 marks)
(b) Identify and explain SEVEN deficiencies in the sales system of Heraklion Co and provide a recommendation to address each of these deficiencies. Note: Prepare your answer using two columns headed Control deficiency and Control recommendation respectively. (14 marks)
(c) In relation to the payroll fraud, identify and explain THREE controls Heraklion Co should implement to reduce the risk of this type of fraud occurring again and, for each control, describe how it would mitigate the risk. (6 marks)
(d) Describe substantive procedures the auditor should perform. to obtain sufficient and appropriate audit evidence in relation to Heraklion Co’s revenue. (4 marks)
第10题
The following scenario relates to questions 11–15
Sycamore & Co is the auditor of Fir Co, a listed computer software company. The audit team comprises an engagement partner, a recently appointed audit manager, an audit senior and a number of audit assistants. The audit engagement partner has only been appointed this year due to the rotation of the previous partner who had been involved in the audit for seven years. Only the audit senior has experience of auditing a company in this specialised industry. The previous audit manager, who is a close friend of the new audit manager, left the firm before the completion of the prior year audit and is now the finance director of Fir Co.
The board of Fir Co has asked if Sycamore & Co can take on some additional work and have asked if the following additional non-audit services can be provided:
(1) Routine maintenance of payroll records
(2) Assistance with the selection of a new financial controller including the checking of references
(3) Tax services whereby Sycamore & Co would liaise with the tax authority on Fir Co’s behalf
Sycamore & Co has identified that the current year fees to be received from Fir Co for audit and other services will represent 16% of the firm’s total fee income and totalled 15·5% in the prior year. The audit engagement partner has asked you to consider what can be done in relation to this self-interest threat.
In relation to the composition of the current audit team, which of the following correctly identifies the fundamental principle which is at risk and provides an appropriate safeguard?
A.A
B.B
C.C
D.D
Which of the following identifies the threat which could arise as a result of the finance director’s previous employment at Sycamore & Co and recommends an appropriate safeguard?
A.A self-review threat; review the work performed by the previous audit manager
B.A familiarity threat; a different audit manager should be appointed
C.A self-review threat; change the existing audit plan
D.A familiarity threat; the firm should resign from the engagement
Ignoring the potential effect on total fee levels, which of the following options correctly identifies the threats to independence from providing the above non-audit services?
A.A
B.B
C.C
D.D
Which of the following safeguards would NOT be relevant in mitigating the threat identified in relation to fees?
A.Disclosure to those charged with governance that fees from Fir Co represent more than 15% of Sycamore & Co’s total fee income
B.A pre-issuance review to be conducted by an external accountant
C.The use of separate teams to provide the audit and non-audit services
D.A post-issuance review to be conducted by an external accountant or regulatory body
During the course of the audit of Fir Co, a suspicious cash transfer has been identified. The audit team has reported this to the relevant firm representative as a potential money-laundering transaction.
Which of the following statements is true regarding the confidentiality of this information?
A.Details of the transaction can only be disclosed with the permission of Fir Co
B.If there is a legal requirement to report money-laundering, this overrides the principle of confidentiality
C.Sycamore & Co is not permitted to disclose details of the suspicious transaction as the information has been obtained during the course of the audit
D.In order to maintain confidentiality, Sycamore & Co should report their concerns anonymously
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