UTM

UNIVERSITI TEKNOLOGI MALAYSIA

Fakulti Pengurusan

PEPERIKSAAN AKHIR SEMESTER I

SESI 2015/2016
(FINAL EXAMINATION SEMESTER I
2015/2016 SESSION)

KOD KURSUS SHAC 3053

(COURSE CODE)

NAMA KURSUS AUDIT II

(COURSE) (AUDIT II)

PROGRAM SARJANA MUDA

(PROGRAMME) (BACHELOR DEGREE)

MASA 3 JAM
(DURATION) (3 HOURS)

TARIKH JANUARI 2016

(DATE) (JANUARY 2016)

MARKAH 100 (MENYUMBANG KEPADA 50 PERATUS

(MARKS) MARKAH KESELURUHAN)
(CONTRIBUTING TO 50 PERCENT OF THE
OVERALL MARKS)

ARAHAN KEPADA CALON:

(INSTRUCTION TO CANDIDATES)

Jawab SEMUA soalan.

(Answer ALL questions)

KERTAS PEPERIKSAAN INI TERDIRIDARIPADA 4 MUKA SURAT SAHAJA

(TERMASUK MUKA SURAT INI).
THIS EXAMINATION PAPER CONSISTS OF 4 PAGES ONLY (INCLUDING THIS PAGE).
1. The completion phase of the audit is critical to ensuring a quality audit. In this phase,
auditors perform additional tests for presentation and disclosure, including reviewing
for contingencies and subsequent events.

Required:
(a) Explain the major considerations an auditor should take into account in
determining how extensive the review of subsequent events should be.
(4 marks)
(b) Distinguish between a contingent liability and actual liability. Provide three
examples of each.
(6 marks)
(c) Distinguish between the two general types of subsequent events and explain
how they differ. Give two examples of each type.
(10 marks)

2. The International Standard of Auditing (ISA) 600 (Revised and Redrafted), Special
Considerations - Audits of Group Financial Statements (Including the Work of
Component Auditors) outlines the group auditor’s responsibility prior to forming an
audit opinion on the group financial statements.

Required:
(a) Two main objectives of group auditor, firstly to establish whether it is
appropriate to act as group auditor and secondly, the group auditor should
gather sufficient and appropriate evidence in order to reach an opinion on the
consolidated financial statements. Discuss the three-stage process involved in
audit of the group financial statements.
(10 marks)
(b) A joint audit is becoming increasingly common especially in group audits
where a component may be audited by both the group auditor and another
auditor. Discuss two advantages and disadvantages of having this kind of audit
work arrangement.
(10 marks)
3. The International Standard on Auditing (ISA 620) deals with the auditor’s
responsibilities relating to the work of an individual or organization in a field of
expertise other than accounting or auditing, when that work is used to assist the
auditor in obtaining sufficient appropriate audit evidence.

Required:
(a) Define ‘Management’s Expert’ as in Para 6 (c) of ISA 620 and provide two
examples of management experts.
(6 marks)
(b) Explain five requirements as outlined in Para 7 of ISA 620 with regards to
determining the need for an auditor’s expert.
(14 marks)

4. Based on a cost-benefit analysis, management at Uno Commerce Bank decided to

contract with Hi-Tech Solutions, a local data centre operator, to host all the bank’s
financial reporting applications. To avoid the significant costs of developing and
maintaining its own data centre, Uno Commerce contracts with Hi-Tech Solutions to
provide IT server access in a highly secure, environmentally controlled data centre
facility owned by Hi-Tech Solutions. Similar to Uno Commerce Bank, other
businesses also contract with Hi-Tech Solutions to host applications at the same data
centre.

The bank is directly linked through highly secure telecommunication lines to the data
centre, which allows bank personnel to transmit data to and from the data centre as if
the data centre was owned by Uno Commerce Bank. For a monthly fee, Hi-Tech
Solutions supports the server in an environment with numerous backup controls in
the event power is lost or other hardware failures occur. Bank personnel are
responsible for selecting and maintaining all application software loaded on Hi-Tech
Solutions servers, and selected bank personnel have access to those servers located at
Hi-Tech Solutions data centre. Bank personnel enter all data, run applications hosted
at Hi-Tech Solutions, and retrieve reports summarizing the processing of all bank
transactions.

Required:
(a) Although IT can improve a company’s internal control, it can also affect the
company’s overall control risk. Discuss three specific risks to IT systems.
(6 marks)
(b) To address many of the risks associated with reliance on IT, organizations often
implement specific IT controls which according to auditing standards known as
general controls and application controls. Explain how general controls and
application controls reduce IT risks.
(10 marks)
(c) What risks might Uno Commerce Bank assume this approach to IT system
support?
(10 marks)
(d) How does the use of Hi-Tech Solutions impact Uno Commerce Bank’s internal
control?
(6 marks)
(e) What impact, if any, does reliance on Hi-Tech Solutions as the data centre
provider have on the audit of Uno Commerce Bank’s financial statements?
(8 marks)