ASSURANCE

Time allowed – 2 hours

Total 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. The term assurance has started gaining popularity in the auditing profession in our country. Not having
enough clarity on the context, many people use this term in misleading ways.
a) How many types of assurance engagements are identified in the International Framework for Assurance
Engagements? 3
b) You, being a professional accountant in practice, have been approached by Mr. Rahin who wants to
invest in Atia Foods Ltd. He has asked you for assurance whether the recent financial statements of the
company are reliable basis for him to make his investment decision.
As you have accepted the engagement, identify the key elements of an assurance engagement in this scenario. 6
c) In an assurance engagement there are several subsidiary benefits available to other parties, although the
assurance report is not addressed to such parties. Briefly describe these subsidiary benefits. 6
d) Before accepting an engagement an auditor must carry out minimum procedures to make sure that he
would be able to accomplish the whole assignment in a very high quality professional standard. What are
those procedures an auditor must carry out? 5

2. (a) Define “Internal Control”. What are the objectives of internal control system? 4
(b) Define and brief about: (i) Control Environment; (ii) Audit Committee; iii) Entity’s risk assessment process. 6
(c) What are usual activities an internal audit function accomplishes? Briefly explain the difference between
internal and external audit. 7

3. (a) What are the procedures outlined in BSA 500 to obtain evidence? Explain. 8
(b) Describe substantive procedures you should perform in an assurance engagement at the year end to
confirm each of the following for plant and equipment: 6
i. Additions; and
ii. Disposals.
(c) You are an Engagement Manager of an audit engagement.
Prior to deploying your team to the proposed engagement, explain to the team the types of control
activities they should test in order to build their confidence on the overall control environment. 5
(d) What do you mean by audit documentation? What purpose does audit documentation serve? 6

4. (a) The Audit Engagement Letter is a very vital document underlying an audit engagement. As you are
required to have sufficient knowledge about the engagement letter, state:
i) What are the objectives of Audit Engagement Letter? 5
ii) Write in brief the basic contents of an Audit Engagement Letter. 7
(b) Despite having substantial uncertainty on Going Concern issue, Shahid Securities Ltd. prepared its financial
statements on Going Concern basis. What effects will this situation have on your audit report in the event of
uncertainty over Going Concern under following circumstances:
i) The matter fully disclosed in the financial statements. 3
ii) The matter not disclosed in the financial statements. 3

5. Ethics in the business is considered as the most expected core vale which individuals should follow and
demonstrate in their respective field of activities. International Ethics Standards Board for Accountants
(IESBA) has issued a set of Code of Ethics which ICAB being a member of IFAC has adopted word for word
for its members to follow in their respective field of work.
a. Why independence and objectivity matter so much and what can the auditors do to maintain objectivity? 5
b. What do you understand by independence of mind, independence in fact and independence in appearance? 5
c. A financial interest in a client constitutes a substantial self-interest threat. What are the available
safeguards to avoid such threat? 5
d. Accountants in business may face more pressure to behave unethically. Cite two such examples which
accountants usually face while carrying out their duties. 5

– The End–