Pakistan Institute of Public Winter Exam-2021

Finance Accountants [03.Nov.2021] [02:30 – 05:15 pm]

Additional time – 15 min for Paper Reading

Audit & Assurance (PS) (Application)

AGP | PG | Public Sector
Marks-80 Subjective Duration: 02 Hours 30 Minutes
[Instructions]
 Ensure that the question paper delivered to you is the same, in which you intend to appear.
 Read the instructions given on the title page of Answer Script.
 Start each question from fresh page.

Books Allowed:
 Financial Audit Manual with Appendices
 Audit Working Paper Kit
 Quality Management Framework

Attempt FOUR questions including Question No. 4, which is compulsory

Q.1. Auditor X works at FAO DD since 2015. He has been part of audit team dealing with audit
of Civil Hospital and main Health Ministry Offices. He has developed a good understanding
of entity and has developed good linkages with Management and any coordination required
for health related issues of family and friends of the officers and staff working at FAO. His
expertise to understand the key internal control issues related to a health establishment has
been exceptional. Auditor X is being considered for an assignment for a works related audit
where he has limited understanding and also is not professionally sound to take up the
assignment. In the year 2020 during Internal Audit of FAO it was highlighted that majority
of the staff working in field do not get rotation and therefore it was recommended to rotate
the auditors. Further, there are complaints about official’s linkages with audit leading to
ethical dilemma. One of the officer has pointed that auditor is unnecessarily exploiting the
facts related to procurement as he has personal animosity with the complainant due to a
previous year incident of little argument during discussion.
Required:
Considering above scenario, highlight risks and benefits for the audit management to decide 20
on the matter citing references from code of ethics for auditors and suggest way forward.
What steps needs to be taken by the audit office, if such incident is reported for protection
of auditor?

Q.2. What helps auditor in forming its opinion? Explain in your own language citing the role of 20
standards and basic principles of auditing?

Q.3. What are the roles and functions of Chief Finance & Accounts Officer in Public Sector? 20
Explain FOUR functions in detail? What are the key changes to the role of Financial
Advisor after introduction of PFM Regulations 2019?

Contd….
 (2)

Q.4. You are planning to start Financial Attest Audit of a client for the year ended
30th June 2021.The client has provided Financial Statements. While analyzing the
Financial Statement you came to know that the total expenditures reported by the
client for the year ended 30th June 2021 are Rs.145,765,000. The breakup of these
expenditures are as follows;

Rs.
Salary and wages 62%
Civil Works 25%
Operating expenses 05%
Training and Workshops 08%

Required: 20
(a) Calculate:
(i) Materiality
(ii) Expected Aggregate Error
(iii) Planned Precision

(b) Fill in the below table at 90% confidence level using the data table given
below:

70%or less 75% 80% 85% Confidence Level 90% 95% 97.5% 99%

1.21 1.39 1.61 1.90 Basic Precision Factors 2.30 3.00 3.69 4.61

0.24 0.31 0.39 0.48 PGW Factors 0.59 0.75 0.88 1.03
Factor from table

Population Value
Average Sample
Aggregate Error

Basic Precision

Basic Precision

Sample Size
PGW factor
Confidence

from Table

Materiality

Precision
Expected

Planned

Interval

Audit
Level

PGW

(Rs.)

Component:

Salary &
Wages

Civil Works

Operating
Expenses

Training &
Workshops

Note: Use component wise Materiality of 50% of materiality at the Financial Statement level.
Contd….
 (3)

Q.5. (a) What is Known Error? During audit of an entity auditor tests a sample of 250 10
transactions out of a population of 15,000 and finds an overstatement in 3
transactions worth Rs. 2,000 each.
Calculate known error on the basis of available information.

(b) Write a short note on DAGP Strategic Objectives. 10

Q.6. During evaluation of audit results, the auditors conclude with ambiguous results or 20
unacceptable results. In this situation, what are the possibilities when:
(a) MLE is less than materiality and upper error limit is greater than materiality
(b) Most likely error greater than materiality

Required:
Explain your answer with examples.

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