ASSURANCE

Time allowed: 2:15 hours

Full Marks: 100

[N. B. – The figures in the margin indicate full marks. Questions must be answered in English. Examiner will
take account of the quality of language and of the manner in which the answers are presented.
Different parts, if any, of the same question must be answered in one place in order of sequence.]

Marks
1. a) “Assurance can never be absolute” – write limitations of assurance. 7
b) You have been appointed as statutory auditor of Zaiden Ltd, a private limited
company. Before starting the audit work, a written audit engagement contract needs
to be executed. Write the issues required to be included in the audit engagement
letter. 8
2. “Control activities are the actions taken to minimize risk.”
a) What do you understand by control activities as per International Standards on
Auditing (ISA)? 5
b) What are the various types of control activity as per ISA? Explain in brief the various
types of control activities. 10
3. Analytical procedures help an auditor understand the client’s business.
a) Define analytical procedure. 3
b) Briefly explain the ways and means to perform analytical procedures. 4
c) The following financial information of Fleming Ltd. taken from Budget-2019 and
Actual-2019 annual accounts is under review:
Budget 2019 (Tk) Actual 2019 (Tk)
Sales 1,500,000 1,439,665
Cost of sales 900,000 996,685
Gross margin 600,000 442,980
Salaries 375,000 371,600
Repairs and renewals 8,600 26,200
Depreciation 9,000 8,400
Motor expenses 28,000 16,978
Other costs 46,000 44,290

You are required to carry out analytical procedures and comment on following with
reasons: 8
Sales and Cost of sales.
Repairs and renewals.
Motor expenses.
4. a) Briefly discuss about activities of the Internal Audit function. 5
b) What do you mean by ‘Internal Control’? Give a brief about the objectives of the
internal control system. 5
5. a) A standard audit file is a key source of information underlying an audit. Give a chart
of ideal contents of an audit file. 6
b) A document containing record of procedures performed, information of relevant
evidence obtained and conclusions the auditor reached is considered as working
paper. Please list out the key features of a ‘Working Paper’. 4

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6. ICAB has adopted IESBA Codes of Ethics for its members to abide by in the
professional activities irrespective of their fields of work either be it in the practice or in
the business.
a) How do you differentiate between independence in mind and independence in
appearance? 5
b) Honest Sincere & Co., Chartered Accountants is the auditor of High Standard Bank
Ltd. (HSBL) for the year ending 31 December 2018. In the recent past, there were
number of news in the national level newspapers as regards some financial scandals
where HSBL was also in the news coverage. Being a listed bank, the management
has been putting substantial effort to defend the scandals issuing press notes and
various advertisements. This bank has a small overseas branch in New York which
in fact does not produce any significant (less than 1% of the gross revenue) business
for the bank. On the other hand, of the top five branches (4 in Dhaka and 1 in
Khatunganj, Chattogram), the Khatunganj branch alone contributes 15% of the gross
revenue.
As part of the audit process the firm planned to visit total seven branches. While
sitting with the management for selecting branches, the Deputy Managing Director
(DMD) of the bank requested Mr. Honest (the Engagement Partner) to cover the
New York branch. The DMD also confirmed that the bank would bear costs of
business class air tickets and standard accommodation for the audit team. Mr. Honest
accepted the offer and finalized the list of 7 branches including the New York.
Surprisingly, the highest revenue generating branch has not been kept into the list.
During the course of the audit, Mr. Honest accompanied by one professional staff
flew to New York and came back after 15 days with the audit results.
Evaluate the case as mentioned above with respect to code of ethics for the
professional accountants in practice. 6
7. How will you verify the following items appearing in the Statement of Financial
position?
a) Inventory. 6
b) Receivable. 6
8. Write short notes on the following items as described in the IESBA Code of Ethics:
a) Conflict of interest. 3
b) Self-review threat. 3
c) Intimidation threat. 3
d) Safeguards. 3

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