Professional Documents
Culture Documents
QUESTION 1
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Enable an auditor’s report that is
appropriate in the circumstances to be
issued
c) Four (4) factors to be considered by the quality control reviewer when reviewing
the work performed by the audit engagement team.
1. The work has been performed in accordance with professional standards and
legal requirements
2. Significant matters have been raised for further audit considerations
3. The evidence obtained is sufficient and appropriate to support the audit report
4. Appropriate consultations have taken place and the resulting conclusons have
been documented and implemented
5. Audit work performed support the consideration for the need to revise the
nature, timing and extent of work performed and also support the conclusions
reached by auditor
(any 4 x 1 mark = 4 marks)
(Total: 15 marks)
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QUESTION 2
A
a) The three major steps in assessing control risk in the inventory process are:
b) During the observation of the physical inventory count, the auditor should perform
the following procedures:
a) The key internal controls related to Realty’s property, plant and equipment, that
Alice may consider in assessing control risk include the following:
QUESTION 3
b) 1. In an audit engagement, the auditor provides a high, but not absolute, level of
assurance that the information subject to audit is free of material misstatement.
This is expressed positively in the audit report as reasonable assurance.
2. In a review engagement, the auditor provides a moderate level of assurance that
the information subject to review is free of material misstatement. This is
expressed in the form of negative assurance.
3. For agreed-upon procedures, as the auditor simply provides a report of the factual
findings, no assurance is expressed. Instead, users of the report assess for
themselves the procedures and findings reported by the auditors and draw their
own conclusions from the auditor’s work.
(3 x 2 marks = 6 marks)
b. The following factors may make it appropriate to revise the terms of the audit
engagement or to remind the entity of existing terms:
1. Any indication that the entity misunderstands the objective and scope of the
audit.
2. Any revised or special terms of the audit engagement.
3. A recent change of senior management.
4. A significant change in ownership.
5. A significant change in nature or size of the entity’s business.
6. A change in legal or regulatory requirements.
7. A change in the financial reporting framework adopted in the preparation of the
financial statements.
8. A change in other reporting requirements.
(any 3 x 1 mark = 3 marks)
b. To benefit from the partners wide experience and insight, thereby enhancing the
effectiveness and efficiency of the planning process and outcome.
(2 marks)
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3. Inquiry and interviews with the company's management, directors, and audit
committee.
4. Observation, i.e. take a tour of the company's physical facilities, keeping eyes
open for activities and things that should be reflected in the financial reports.
The tour is the time to see company personnel in their normal workplaces.
5. Study numerous sources, e.g. accounting and auditing standards, specialized
trade magazines and journals, general business magazines and newspapers.
(any 4 x 1 mark = 4 marks)
D. 1. Inherent risk – Lack of accounting and financial reporting skills as the accounts
executive is not qualified.
2. Inherent risk – The company’s operations are subject to regulations.
3. Detection risk – Incorrect sampling method. The test of controls should not deal
with monetary values.
4. Detection risk – Not corroborating with other procedures to obtain reasonable
assurance. Analytical procedures and inquiry will give moderate assurance.
(4 marks)
1. Occurrence
All sales recorded are bona fide transactions for service actually rendered to
the customers.
2. Accuracy
All sales have been appropriately recorded as to the monetary value and
information of sales transactions.
3. Classification
All sales have been recorded in the proper accounts.
4. Completeness
All sales rendered have been invoiced and recorded in the accounting records
(any 4 x 1 mark = 4 marks)
(Total: 25 marks)
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QUESTION 5
d. Non-sampling risk, because it is the risk that the auditor reaches an erroneous
conclusion from using inappropriate audit procedures.
(2 marks)
(Total: 10 marks)
QUESTION 6
1. The title of the report should include the addressee. The title should be
“Independent Auditor’s Report to the Members of Retail Harian Sdn. Bhd.”
a. Introductory paragraph
b. Directors’ responsibility for the financial statements
c. Auditor’s responsibility
d. Auditor’s opinion
3. The introductory paragraph should identify the entity and state which
financial statements are covered by the audit report. The usual wording is
“We have audited the financial statements of Retail Harian Sdn. Bhd. on
pages x to xx”.
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4. The paragraph of the directors’ responsibility for the financial statements
shall include an explanation that management is responsible for the
preparation of the financial statements in accordance with the Malaysian
Financial Reporting Standards.
8. Auditors are not required to ensure that all relevant sections of the
Companies Act have been complied with. However, auditors should state
that the financial statements have been properly prepared in accordance
with the Companies Act 1965.
9. The report should be signed both in the name of the audit firm and
personal name of the auditor.
10. The report should be dated and have the auditor’s address (e.g. city)
(any 9 x 1 mark = 9 marks)
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