Audit Past Papers

The Institute of Chartered Accountants of PakistanModular Foundation Examinations Autumn 2001September 07, 2001AUDITING (MARKS 100)Module ‘D’ & SM ‘9’ (Paper – D 11) (3 hours)

Q.1 (a) You have been approached by a leasing company for appointment as its first auditor.List down five “client screening procedures” which you will perform before making adecision regarding acceptance of the audit.

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(b) You have been appointed as auditor of a listed company. Draft a letter which you willsend to the retiring auditors seeking their professional clearance.

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Q.2 Engagement letters are sent by the auditors to their clients describing essentiallythe following matters:(a) scope of audit(b) fraud and irregularities(c) accounting, taxation and other services(d) feesDraft an engagement letter covering all of the above points.

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Q.3(a) What is the primary objective of an audit?

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(b) Explain the term “reasonable assurance” in the context of audit opinion.

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Q.4 You have been assigned to review the payment system of an enterprise. The FinanceDirector suspects that some duplicate payments may have been made. List five controlprocedures which you would expect to find.

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Q.5 Discuss briefly the considerations that you would take into account in developingthe overall audit plan for an audit engagement.

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Q.6 You have been asked by your senior to observe the stock count at one of the auditclients:(a) What procedures would you perform prior to the physical count to ensure asmooth stock count?

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(b) During the stock count, how would you ensure that the physical inventorylisting provided to you is complete?

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(c) How would you ensure proper cut off for purchases and sales?

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Q.7(a) Differentiate between tests of controls and substantive procedures.

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(b) What tests of controls would you perform while carrying out a review of the payrollsystem of a company?

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(02)Q.8 What is the reporting responsibility of the auditor in the following circumstances:(a) A major suit has been filed against the client which is pending in the SupremeCourt. The matter has been decided against the company in lower court. Themanagement has not made any provision against this case and is also refusingto disclose this case as a contingency.

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(b) The company has investment in the shares of a listed company. The marketvalue is significantly lower than the cost and the company has not made anyprovision for diminution in value. However, the market value is properlydisclosed in the financial statements. The contention of the company is that theinvestment is long term in nature and the present diminution is temporary. Theeffect of diminution in value is material.

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(c) The company is using LIFO method for valuation of stocks. The effect of usingthe LIFO method is disclosed in the financial statement which is a materialfigure.

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Q.9(a) What do you understand by a Computer Information System (CIS) environment in anaudit?

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(b) What are the nature of the risks and the internal control characteristics that are normallythere in a CIS environment?

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Q.10 List down basic elements of a management representation letter.

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Q.11 What are various sources of audit evidence available to the auditor?

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Q.12 You are asked to devise form and contents of audit working papers. Write a draft letterto your principal giving your suggestions regarding the form and contents of workingpapers in accordance with the relevant International Standard on Auditing.

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Q.13 Discuss as to how analytical review procedures are used by auditor to help himat the completion stage of an audit.

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Modular Foundation Examinations Spring 2002March 08, 2002AUDITING (MARKS 100)Paper –D 11, (Module D, SM ‘9’ & ‘4B’) (3 hours)

Q.1 Briefly discuss what is meant by the term ‘true and fair view’ in the context of audit of financial statements.

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Q.2 (a) Describe the procedure prescribed in the Companies Ordinance, 1984 forremoval of auditor of a listed company.

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(b) Can auditor of a listed company be removed during the term of hisoffice?

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Q.3 (a) Why adherence to International Standards on Auditing is so important forauditors? Discuss

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(b) What is the scope of an audit? Also discuss as to who is responsible to preparefinancial statements.

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Q.4 (a) Define “materiality”. Give two examples of qualitative aspects of materiality.

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(b) When does the auditor normally considers materiality during an audit?

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(c) What are the responsibilities of auditor in respect of assessing the work of anexpert?

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Q.5 (a) What are the objectives of test of control? Give some examples of such tests.

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(b) What is a ‘Walkthrough Test’? Under what circumstances it may be treatedas test of control?

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(c) What is the relationship between detection risk and combined level of inherentand control risk?

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(d) Describe the term ‘operational audit’.

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Q.6 (a) What is meant by sufficient and appropriate audit evidence? Under whatcircumstances an auditor can rely on management representation as part of auditevidence.

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(b) What are the basic assertions which the auditor would aim to address whilecarrying out verification of fixed assets.

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