Pyq Aud339 Sem 5 Pyq Jan 2018

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PYQ AUD339 SEM 5 - pyq jan 2018
Accounting (Universiti Teknologi MARA)
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CONFIDENTIAL 1 AC/APR 2019/AUD339
UNIVERSITI TEKNOLOGI MARA

COMMON TEST 1
COURSE : AUDITING
COURSE CODE : AUD339
EXAMINATION : APRIL 2019
TIME : 1 HOUR 30 MINUTES
INSTRUCTIONS TO CANDIDATES
1. This question paper consists of three (3) questions.
2. Answer ALL questions in the Answer Booklet. Start each answer on a new page.
3. Do not bring any material into the examination room unless permission is given by the
invigilator.
4. Please check to make sure that this test pack consists of :
i) the Question Paper

ii) an Answer Booklet – provided by the Faculty
DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 4 printed pages
© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

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QUESTION 1
All auditing activities of an audit firm in Malaysia fall under the jurisdiction of Malaysian
Institute of Accountants (MIA). The audit of the financial statements does not relieve
management or those charged with governance of their responsibilities.
Required:
a. MIA provides International Standards of Auditing (ISA) as guidance for auditors. Why
should the auditor comply with these standards in performing their audit works?
(3 marks)
b. Briefly explain any TWO (2) management responsibilities and any TWO (2) auditor’s
responsibilities towards the financial statements.
(4 marks)
c. Discuss the agency theory in the context of Auditing.

(4 marks)
d. Explain any TWO (2) reasons for the demand for auditors’ services.
(4 marks)
(Total: 15 marks)
QUESTION 2
Financial statement audits are conducted by professionals trained in the accounting

fraternity. Both auditors and accountants are trained in similar professional backgrounds and
possess similar professional qualifications.
Required:
a. The auditor is only giving a reasonable assurance that the financial statements are
free from all material misstatements. Explain.
(4 marks)
b. Differentiate between compliance audit and operational audit.

(4 marks)
c. For each of the following statement, state what type of auditor it refers to:
i. Their concern is whether the department or unit being audited in the Ministry
of Finance at Putrajaya is managing its resources in an economical and
efficient manner.
ii. Among their main roles are to ensure that the internal controls are adequate
and effective to safeguard assets and ensure that each unit of the
organization follows the established policies and procedures.
iii. Their primary concern is to serve the needs of third parties and their objective
of review is to determine the reliability of financial reports.

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iv. They focus directly to an issue defined by the audit client. This issue may
involve employee fraud or a dispute with a vendor or customer. It may
require analysis of financial transactions and compilation of the information
for use in court cases.
(4 marks)
d. State any THREE (3) examples of non-assurance services that may be provided by
auditors.
(3 marks)
(Total: 15 marks)
QUESTION 3
A. The statutory provisions for the qualification, disqualification and appointment of auditors
are set out in Sections 263 to 267 of Companies Act 2016.
Required:
a. Identify TWO (2) criterias of a person qualified to be approved by the Ministry of

Finance to act as an auditor.
(2 marks)
b. State any FOUR (4) situations where the auditor will be disqualified to be appointed
as an independent auditor under Section 264 of Companies Act 2016.
(4 marks)
c. Explain the appointment of auditor by the Board of Directors as stated in Section 267
of Companies Act 2016.
(4 marks)
B. Auditor-client’s relationship is tied by the Companies Act 2016. Thus, it is important for
both parties to be aware of the statutory provisions therein in undergoing their dealings.
Required:
State whether the following situations violate the Companies Act 2016 requirements and
provide reason for each of the answer. Present your answers in the following formats:
Situation Violated/Not violated Reason

a.
b.
c.
d.
e.

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a. Zamri is a partner of a newly operated audit firm, Zamri & Co. In order to attract
clients, Zamri offers a fixed audit fee of RM3,000 for the first three clients.
b. The auditor of GreenTech Bhd. submitted a resignation notice and three days after
receiving the notice, the company sent a copy of the notice to the Registrar.
c. The management of Ecomart Bhd has a dispute with its auditor. As a result, they
have decided to remove the auditor before the term end by issuing him a removal
letter.
d. A fraudulent activity was found during the audit but the client refuses to follow the
auditor’s advice. Instead, the client asked the auditor to help them conceal the fraud.
The auditor immediately resigned by emailing the resignation letter to client.
e. Ismail has been appointed as the partner-in charged for the audit of Yayasan Bina
Akademik. He still has RM10,000 study loan outstanding from the institution.
(10 marks)
(Total: 20 marks)
(TOTAL: 50 MARKS)
END OF QUESTION PAPER

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COMMON TEST
ANSWER SCHEME
COURSE : AUDITING

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QUESTION 1
a. The auditing standards contain basic principles and essential procedures for performing the
audit. Compliance to the standards would ensure consistency of practices among auditors
and maintenance of high quality standards that are expected from the audit. √√√
(3 √ x 1 mark = 3 marks)
b.
Management responsibilities Auditor’s responsibilities
i. Preparation of yearly financial i. To state an opinion on the financial

statements √ statements in the auditor’s report
ii. To maintain adequate accounting based on his independent
records and internal control systems. examination. √
√ ii. To provide reasonable assurance
iii. Prevention and detection of errors, that financial statements are free
irregularities and fraud. from material misstatements. √
iii. Audit performed with due care and
professional competence.
(Any 4 √ x 1 mark = 4 marks
c. The agency theory: It is about a contract under which one or more persons (the principal/s
engage another person (the agent) to perform services on behalf, which involve delegating
some decision making auhority to the agent. In the context of auditing, the agency
relationship exists between owners (shareholders) and management (agent) resulting in
conflict of interest due to information asymmetry. Audit is needed to safeguard the interest of
the shareholders. √√√√
d. (i) Regulations – Malaysian Companies Act 2016 requires that companies must undergo an
examination by external auditors. In addition, when companies want to issue new shares, a
report by auditors is required to be part of the prospectus. √√
(ii) External parties – Various external parties interested with the financial statements
prepared by management. There is a potential conflict of interest between the preparer and
those who use the financial statements. The independent auditor (by furnishing an
independent opinion on the financial reports prepared by management) provides some
assurance of the reliability of the financial reports. √√
(4 √ x 1 marks = 4 marks)

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QUESTION 2
a. The auditor would normally select samples of transactions for examination rather than 100
% of the items in the population. Sampling might include some risk of not uncovering
material misstatement. Even if 100% examination is performed, it is still impractical for the
auditor to provide absolute assurance on the accuracy of financial statements, as certain
errors might remain undiscovered. Moreover, fraudulently prepared financial statements are
often extremely difficult for auditor to detect especially when there is collusion among
management. √√√√
b.
Compliance audit Operational audit
Undertaken to determine whether the client Confine to operations in the functional areas
is conforming to certain procedures and of business and is executed for
regulations set by management or a management, may be defined as a
regulatory authority. √√ systematic independent appraisal activity
within organization, for the review of entire
departmental operations as a service to
management. √√
(4 √ x 1 mark = 4 marks
c.
i. Government auditor √
ii. Internal auditor √
iii. External auditor √
iv. Forensic auditor √
d.
i. Bookkeeping & accounting √
ii. Tax services √
iii. Management consultancy √
QUESTION 3
A.
a.
 A person with a good character and competent to perform the duties of an auditor √
 Chartered accountant as defined under the Accountant Act 1967 √
(2√ x 1 mark = 2 marks)

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b. FOUR (4) situations where the auditor will be disqualified to be appointed as an independent
auditor:
i. He is not an approved auditor

ii. He is indebted to a company or to a corporation that is deemed to be related to the
company by virtue of Section 7 in amount exceeding RM25,000.
iii. He is or his spouse is an officer of the company
iv. A shareholder or his spouse is a shareholder of a corporation.
v. He is working for the company and leave the company less than 12 months.
vi. He is an undischarged bankrupt within or outside Malaysia except with leave of the
Court
vii. He has been convicted of any offence involving fraud or dishonesty punishable with
imprisonment for three months or more.
(Any 4 points x 1 mark = 4 marks)
c. The Board shall appoint an auditor of the company:
a) In the case of newly incorporated companies, at least thirty days before the end of the
period for the submission of the first financial statements to the Registrar, or √√√
b) To fill a casual vacancy in the office of auditor. √
B.
Situation Violated/ Reason
Not violated
a. Violated √ Section 274 CA 2016: Auditor’s remuneration shall be paid by the

member, Board and Registrar. In this case, Zamri fixed the
amount, therefore, violated the Act. √
b. Not violated Section 282 CA 2016: Where an auditor resigns his office, the
√ company shall send a copy of the notice to the Registrar within
seven (7) days from the receiving of the notice of resignation. In
this case, the company seven the notice three days after receiving
the notice. Thus, not violated. √
c. Violated √ Section 276(1) CA2016: The members of a company may remove

auditor from office at any time by ordinary resolution at a general
meeting, and in accordance with section 277 (special notice for
resolution to remove auditor). In this case, the management
removes the auditor by issuing a removal letter. Thus, violated the
CA 2016. √

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d. Violated √ S281(1) states that an auditor may resign his office by giving
notice in writing to that effect to the company at its registered
office. In this case, auditor immediately resign by emailing the
resignation letter has violated the act. Thus, violated. √
e. Not violated Section 264(1)(c)(ii) states that a person shall not act as the
√ auditor if he is indebted to the company in an amount exceeding
RM25,000. In the situation, Ismail is indebted RM10,000. As such,
he did not violate the CA 2016.√
(10 √ x 1 mark = 10 marks)
(Total: 20 marks)
TOTAL: 50 MARKS
END OF SUGGESTED SOLUTION

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CONFIDENTIAL 1 AC/OCT 2019/AUD339

COMMON TEST 1
COURSE : AUDITING
EXAMINATION : OCTOBER 2019
1. This question paper consists of THREE (3) questions.
invigilator.
4. Please check to make sure that this test pack consists of:

5. Answer ALL questions in English.


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QUESTION 1
Audit can also be defined as:
“Audit is an independent examination of, and expression of opinion on, the financial
statements of an enterprise by an appointed auditor (competent independent person) in
pursuance of that appointment and in compliance with any relevant statutory requirements”
Required:
a. Briefly explain the following keywords from the above definition:

i. Independent examination
ii. Appointed auditor
(4 marks)
b. Determine any THREE (3) functions of the Malaysian Institute of Accountant (MIA) in
regulating the profession.
(3 marks)
c. Identify any TWO (2) regulatory requirements that helps to regulate an auditing
process and profession in Malaysia.
(2 marks)
d. Nowadays the role of auditor is more important than twenty years ago. Identify any
THREE (3) factors that lead to the demand for auditing.
(3 marks)
e. State any THREE (3) responsibilities of management relating to financial statements.

(3 marks)
(Total: 15 marks)
QUESTION 2
As a consequence of recent business scandals, the function of auditors has become more
important in business and society. Due to this the accounting profession is reforming itself.
Among others, the objective of an audit of financial statements is to provide a reasonable
assurance whether the financial statements are prepared in all material respects, in
accordance with al identified reporting framework.
Required:
a. State any THREE (3) reasons for the auditor to provide reasonable assurance rather
than absolute assurance.
(3 marks)
b. One of the problems associated with agency relationship is the information

asymmetry. Briefly discuss the term ‘information asymmetry’ as described in the
agency relationship.
(2 marks)

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c. Differentiate between internal and external auditor using the following characteristics:
No. Characteristics Internal auditor External auditor

i Independence
ii Appointment
(4 marks)
d. Describe any TWO (2) situations that may involve forensic audit.
(2 marks)
e. Identify the type of audit applicable in the following situation:
No Situation Type of audit

i. Examine contractual agreements with bankers and
other lenders to be sure the company complying with
legal requirements.
ii. Evaluate the computer operations of a company to
identify whether the computer center is being operated
as efficiently as possible.
iii. Examine a sample of vendors’ invoices to determine
whether the goods received are of the type normally
used by the business.
iv. Determine whether factory operational requirement
has been adhered and complied by the staff.
(4 marks)
(Total: 15 marks)
QUESTION 3
A. The Companies Act 2016 has replaced the Companies Act 1965 and changed the
landscape of company law in Malaysia. The Companies Act 2016 reformed almost all
aspects of company law in Malaysia.
Required:
a. Briefly explain any TWO (2) situations where the auditor can be disqualified to
become an approved company auditor in accordance to Section 264 of the
Companies Act 2016.
(3 marks)
b. Section 271 mentioned on the conditions to appointment an approved company

auditor for a public company. Briefly discuss any TWO (2) conditions for
appointment of an approved company auditor for a public company.
(3 marks)
c. Explain the process for resignation of auditor as prescribed under Section 281
and 282 of the Companies Act 2016.
(4 marks)

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B. Companies Act 2016 provides a requirement for a company to appoint an approved

company auditor. In addition, it also covers on duties, powers and conditions on
appointment of company auditor.
Required:
State whether the following situations violate the Companies Act 2016 requirements.
Provide a reason for each of the answer. Present your answer in the following format:
Situation Violated / Not Violated Reason

a.
b.
c.
d.
e.
a. Afifah has left Jentayu Bhd in November 2018 and eventually joint Ros &
Associate in December 2018. During January 2019, she is assigned to audit the
financial statement of Jentayu Bhd for the year ended 31 December 2018. She
accepted the task.
b. Haziq is a newly appointed auditor for Teraju Holdings. He insisted to attend the
annual general meeting of the company even though the directors did not allow
him to do so.
c. As a newly established audit firm, Sarah has provided an offer to her potential
audit client for an audit fees of only RM500 for the earliest five new clients.
d. The board of directors of Setia Sdn Bhd has appointed a new auditor for the
company due to termination of business of the existing audit firm that serve the
company currently.
e. The shareholders of Pawana Bhd has decided to remove their existing company
auditor. Hence, they have submitted a 20 days special notice to the company for
resolution to remove the auditor.
(10 marks)
(Total: 20 marks)
(TOTAL: 50 MARKS)

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SUGGESTED SOLUTION COMMON TEST
COURSE : AUDITING

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QUESTION 1
a. Briefly explain the following keywords from the above definition:

• using audit procedures and carrying out tests to accumulate evidence which are
independent from management before arriving at the conclusions on which the
audit opinion is based. //
ii. Appointed auditor

• an approved company auditor or the audit firm ranges from sole proprietorships
to partnerships providing broad categories of services such as attestation services
including audits, tax services, accounting service and management advisory
services. //
Or any acceptable answers.
(4/ x 1 mark = 4 marks)
b. THREE (3) functions of the Malaysian Institute of Accountant (MIA) in regulating the
profession:
• To regulate the accounting profession in Malaysia. /
• To review accounting and related practice for Malaysian Accountant. /
• To issues guidelines for accountant. /
• To conduct research on the accounting professions
(Any 3 / x 1 mark = 3 marks)
c. Any TWO (2) regulatory requirements that helps to regulate an auditing process and
profession in Malaysia.
• Malaysian Approved Standards on Auditing (MASA) /
• Malaysian institute of Accountants (MIA) /
• Companies Act 2016
(Any 2 / x 1 mark = 2 amrks)
d. THREE (3) factors that lead to the demand for auditing:

• Complexity of business environment. /
• Users of financial information expectation and agents does not match. /
• Conflict of interesrt on the part of agents/ mamagement. /
• Growing size of buisness entity
e. THREE (3) responsibilities of management relating to financial statements:
• Preparation of annual financial statements. /
• Maintaining adequate accounting records and internal control. /
• Apply appropriate accounting policies. /
• Safeguard of company’s assets
(Total: 15 marks)

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QUESTION 2
a. THREE (3) reasons for the auditor to provide reasonable assurance rather than absolute
assurance:
• Most audit evidence results from testing a sample of population. /
• Accounting presentation enclose complex estimates, which involve uncertainty & can
be affected by future events. /
• Fraud is extremely difficult/impossible to detect. /
b. Briefly discuss the term ‘information asymmetry’ as described in the agency problem.
Information asymmetry is the term used to describe the situation where the agent has
more information about the business than the principal. / Hence the principal has
inadequate information about how the agent manage the business. /
(2 / x 1 mark = 2 marks)
c. Differentiate between internal and external auditor using the following characteristics:
No. Characteristics Internal auditor External auditor
i Independence Independence organizationally Independent in fact and
but ready to respond to needs appearance. /
and desires of management. /
ii Appointment Appointed by management Appointed by the
through formal interview shareholders during AGM.
process. / /
d. Any TWO (2) situations that may involve forensic audit:

• Fraudulent financial reporting /
• Money laundering activities /
• Embezzlement investigation
• Business or employee fraud
• Shareholders or partners dispute
• Criminal investigation
e. Identify the type of audit applicable in the following situation:
No Type of audit
i. Compliance audit /
ii. Operational audit /
iii. Financial statement audit /
iv. Compliance audit /
(Total: 15 marks)

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QUESTION 3
A.
a. Any TWO (2) situations where the auditor can be disqualified to become an approved
company auditor in accordance to Section 264 of the Companies Act 2016.
• if he is not an approved company auditor. /
• if he is indebted to company, its holding or subsidiaries company in an amount
exceeding RM25,000. /
• If he is
– or his spouse is an officer of the company
– a partner, employer or employee of an officer of the company
– A partner or employee of an employee of an officer of the company
– a shareholder or his spouse is a shareholder of a corporation whose employee
is an officer of the company
• he is responsible for or if he is the partner, employer or employee of a person
responsible for the keeping of the register of members or debentures holders
(company secretary)
• He is an undischarged bankrupt within or outside Malaysia.
• He has been convicted of any offence – fraud or dishonesty – punished with 3
months or more imprisonment.
• If any of the partner is disqualified.
• If the S.265 notification (registration of firms of auditors) has not been lodged to
SSM.
(Any 2 / x 1.5 marks = 3 marks)
b. Any TWO (2) conditions for appointment of an approved company auditor for a public
company:
• Powers of Directors to appoint Auditor before 1st AGM. If the directors do not appoint
the first auditor, the members are entitled to do so in the general meeting
• A company shall appoint auditor at each AGM. The term of office of auditor starts
from his appointment at the present AGM until the conclusion of next AGM. The
company must at every AGM appoint or reappoint auditors to hold office until the
conclusion of the next AGM
• Power to directors to appoint auditor to fill any casual vacancy (termination of
business-winding up cases, etc.); except for dismissal/removal
(Any 2 / x 1.5 marks = 3 marks)
c. The process for resignation of auditor as prescribed under Section 281 and 282 of the
Companies Act 2016.
• An auditor may resign by giving notice to the company at the registered office. /
• The auditor shall within 7 days of serving such notice, submit to SSM his reason for
resignation. /
• The company need to send a copy of resignation notice to SSM within 7 days of
receipt. /
• Resignation of auditors shall be valid within 21 days of serving the notice at the
registered office. /

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B. State whether the following situations violate the Companies Act 2016 requirements.
Violated / Not
Situation Reason
Violated
S.264 – A person is disqualified to become an
a. Violated / approved company auditor if he/she is an
officer of the company. /
S.266(7) – An auditor has a power to attend
any general meeting and to receive all
b. Not violated / communications relating to any general
meeting which may concern the auditor in his
capacity as auditor. /
S.274 – The remuneration of an auditor shall

be fixed by a person who appointed the auditor,
c. Violated /
e.g. if appointed by members, the
remuneration shall be fixed by the members. /
S.267 – This section allows the BOD to appoint
d. Not violated / an approved company auditor to fill casual
vacancy. /
S.277 – The act requires special notice of at
e. Violated / least 28 days to be given by shareholders for
removal of auditors. /
(10 / x 1 mark = 10 marks)

(Total: 20 marks)
TOTAL: 50 MARKS

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CONFIDENTIAL AC/APR2021/AUD339

COMMON TEST
COURSE : AUDITING
EXAMINATION : 30 APRIL 2021
2. Answer ALL questions in English. Please save your answer scripts in ONE (1) pdf file and
rename to:
(NAME_STUDENT ID_CLASS)

This examination paper consists of 4 pages

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CONFIDENTIAL 2 AC/APR2021/AUD339
QUESTION 1
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about economic actions and events to ascertain the degree of correspondence between
those assertions and established criteria and communicating thHUHVXOWVWRLQWHUHVWHGXVHUV¶
Required:
a. Based on the above definition of auditing, elaborate the following keywords:
ii. Communicating results
(3 marks)
b. Briefly explain what caused the asymmetrical of information based on the agency
theory and how the auditors can moderate the situation.
(4 marks)
c. IWLVLPSRUWDQWWKDWWKHDXGLWRUWRXQGHUVWDQGPDQDJHPHQW¶VPRWLYDWLRQWRPLVVWDWH
ILQDQFLDOVWDWHPHQWV´
Discuss whether you agree or disagree with the statement and support your answer
with reasons.
(4 marks)
d. Provide any FOUR (4) reasons for the growing demand on auditing
(4 marks)
(Total: 15 marks)
QUESTION 2
A professional audit can perform financial statements audit, compliance audit and
operational audit. An audit of financial statements is a form of attestation service in which the
external auditor issues a written report expressing opinion about whether the financial
statements are fairly stated in accordance with the reporting standards.
Required:
a. Briefly explain the benefits of an audit performed by an external auditor

(3 marks)
b. Why the objective of a financial statement audit includes a reasonable assurance and
not giving absolute assurance?
(4 marks)
c. ³,WLVWKHXOWLPDWHGXWLHVRIDXGLWRUWRSUHYHQWDQGGHWHFWWKH fraud and error that may be

included in the financial statements. Shareholder would expect, being an auditor, he or
she could have the power and means to prevent and detect such irregularities´
Discuss whether you agree or disagree with the statement and support your answer with
reasons.
(4 marks)

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d. Hannah, a major shareholder of Bersinar Berhad, does not understand why the
company needs both internal and external auditors. She claimed that both auditors are
actually performing similar functions.
State the reasons why a company needs to have both the internal and the external
auditors.
(2 marks)
e. State any TWO (2) differences between internal and external auditor
(2 marks)
(Total: 15 marks)
QUESTION 3
The Companies Act 2016 contains various statutory provisions including those relating to the
appointment, rights and responsibilities of auditors.
Required:
a. State THREE (3) of the rights empowered on the auditor in carrying out his
responsibilities.
(3 marks)
b. Soraya, from Soraya, Adi & Co was offered to be the auditor of Bagus Berhad. Soraya is
undecided as to whether her acceptance of the offer would breach the provisions of the
Companies Act 2016. She is particularly concerned about her prior employment as the
company’s chief accountant which ended three (3) years ago and her outstanding debt
of RM20,000 to the company.
Advise Soraya on whether his acceptance as the company’s auditors would contravene
any of the provisions in the Companies Act 2016.
(3 marks)
c. In each of the situation below, explain the requirement of the Companies Act 2016 with
regard to appointment of auditors of public company:
i. Appointment of the auditor by member
ii. Appointment of the auditor due to casual vacancy
(3 marks)
d. State the THREE (3) reasons for casual vacancy
(3 marks)
e. In each of the following circumstances, state with reasons whether the situation violated
or not the relevant provisions stipulated in the Companies Act 2016.
Present your answer in the following format:
Situation Violated / Not violated Reasons

i.

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i. Jasmin is assigned to lead an engagement team for the financial statement audit for
Maju Bank Bhd. Currently she has an outstanding amount of RM 56,000 due to credit
facilities given by Maju bank Bhd.
ii. Recently, Azalea, Syamsul & Wong Associates has been appointed as the auditor of
Gembira Bhd for the year 2020. Azalea’s husband has been the Chief Accountant in
Gembira for about 2 years. The partner – in charge for the audit engagement is
Syamsul.
iii. Kamarul, Saiful & Siti Associates provides services assurance services and other non
– assurance services such as taxation, accounting and company secretarial
practices. The firm is appointed as the company secretary for Jaya Bhd since 2018
and in 2020, Jaya Bhd appointed the firm as its auditor.
iv. Salamah, one of the auditors for Naba Automotive Bhd has been denied an access to
read the minutes of meeting of the Board of Directors meeting on the basis that the
information contained in the minutes are confidential.
(8 marks)
(Total: 20 marks)
(TOTAL: 50 MARKS)

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SUGGESTED SOLUTION
COURSE : AUDITING

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SUGGESTED SOLUTION
QUESTION 1
a. Define:
i. Independent examination: (using audit procedures and carrying out tests to
accumulate self-generated evidence, third – party evidence, etc which are
independent from management before arriving at the conclusions on which
the audit opinion is based) √
ii. Communicating results: to be useful, the results of the audit need to be
communicated to interested parties by either oral or written means. √
(1√ x 1.5 marks = 3 marks)
b. An agency relationship arises when one or more principals (e.g., an owner) engage
another person as their agent (or steward) to perform a service on their behalf.
Agents are likely to have different motives to principals. They may be influenced by
factors such as financial rewards, labor market opportunities, and relationships
with other parties that are not directly relevant to principals. As a result of these
differing interests, agents may have an incentive to bias information flows and
creates information asymmetries. Principals may also express concerns about
information asymmetries where agents are in possession of information to which
principals do not have access. An audit provides an independent check on the work
of agents and of the information provided by an agent, which helps to maintain
confidence and trust.
(notes: marks should be given to the example of what caused the information
asymmetries. Mark will not be given to the definition of agency theory)
(4 marks)
c. Yes. √ It is important for the auditor to understand management’s motivation to misstate

financial statements because helps the auditor to identify the financial statement
accounts with the most potential for misstatement and to design audit procedures to
determine and to give assurance that the accounts are fairly presented according
to the applicable financial reporting framework. √√ √
d. FOUR (4) reasons for the growing demand on auditing
i. complexity of business environment. √
ii. growing size of business entity. √
iii. conflict interest on the part of agents/management. √
iv. users of financial information expectation and agents does not match. √
(4 marks)
(Total: 15 marks)

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QUESTION 2
a. benefits of an audit performed by an external auditor - An audit performed by an external
auditor would ensure that the opinion issued to the shareholders is free from bias and is
highly reliable because it is issued by a competent and independent party that has no
relationship with the management of the company.
(3 marks)
b. Absolutes are not attainable due to factors such as the need for professional judgment,
the use of testing, the inherent limitations of internal control, the reliance in accounting
on estimates, and the fact that audit evidence is generally persuasive rather than
conclusive. More over audit is done based on audit sampling that tested on the
percentage number of transaction and not the whole population. Reasonable assurance
is measure of the level of uncertainty that the auditor has obtained at the completion of
the audit that indicates the auditor is not insurer or guarantor of the correctness of the
FS
(4 marks)
c. Disagree. √
It is the responsible of the management to prevent & detect fraud and error through the
implementation & continued operation of an adequate system of IC. √
It is the auditor’s duty to investigate and report frauds and irregularities only in
circumstances where concerns are raised by evidence, which comes to light in the
course of a normal audit designed to provide reasonable assurance that the financial
report is free of material misstatement. √
Auditor’s responsibility is to plan the audit so that they would have reasonable
expectation of detecting material misstatement in the financial information resulting
from fraud and error such as designing a sufficient audit programme √
(4 marks)
d. why a company needs to have both the internal and the external auditors - External
auditor plays important roles particularly in giving an unbiased opinion on the
financial statements prepared by the management. However, external auditor
PLJKWQRWEHDEOHWRDXGLWHDFKDQGHYHU\DUHDRIDFRPSDQ\¶VRSHUDWLRQ Thus,
the internal auditor, being staff of the company, can play more significant roles
LQFRQGXFWLQJGHWDLOHGUHYLHZRIWKHFRPSDQ\¶VRSHUDWLRQV.
(2 marks)
e. Differences between Internal and External auditor: (any other acceptable answer)
IA EA
REPORTING To the board of directors or to the To the co’s shareholders √

RESPONSIBILITES audit committee or to the mgmt. √
APPOINTMENT Appointed by the co’s mgt through Appointed by the co’s shareholders
formal interview process √ through voting at AGM (or other
types of appointment as per
sec.267 & sec 271) √
(4 √ X 0.5 mark = 2 marks)
(Total:15 marks)

lOMoARcPSD|18799045
QUESTION 3
a. THREE (3) of the rights empowered on the auditor in carrying out his responsibilities.
i. Right of access to accounting and other records.
ii. Right to inquire information and explanations.
iii. Right to attach or endorse the auditors’ report on the financial statements.
(any other acceptable answer)
(3 marks)
b. The acceptance of the engagement would not contravene √ any of the provision of CA
2016 because:
i. Soraya’s employment ended 3 years ago; no threat posed. √
ii. The debt is below RM25,000 √
(3 marks)
c. The requirement of the Companies Act 2016 with regard to appointment of auditors:
i. Appointment of the auditor by members - at the AGM √ and when the board
fails to appoint under sec 271 (2) √
ii. Appointment of the auditor due to casual vacancy - the directors √ may
appoint an approved company auditor to fill any casual vacancy under
(3 marks)
d. THREE (3) reasons for casual vacancy
i. Death of the auditor
ii. Removal of auditor
iii. Resignation of auditor
(3 marks)
e. Situations that may violated or not the relevant provisions stipulated in the Companies
Act 2016.
Situation Violated / Not violated Reasons
i. VIOLATE The amount of outstanding debt is
RM56,000 which is more than the
threshold of RM25,000
ii. NO VIOLATION Although Azalea’s husband is the Chief
Accountant but Azalea is not involved with
the engagement, thus not violate the CA
2016
iii. VIOLATE The firm falls under S264 (iv) - responsible
for the keeping of the register of the
member or register of the debenture
holders of the company thus cannot be
appointed as the auditor
iv. VIOLATION Auditor has right to access any books and
records he deemed necessary and relates
to the audit engagement
(8 marks)
(Total: 20 marks)

lOMoARcPSD|18799045
CONFIDENTIAL 1 AC/OKT 2018/AUD339

COMMON TEST 1
COURSE : AUDITING
EXAMINATION : OKTOBER 2018
invigilator.
4. Please check to make sure that this test pack consists of :



lOMoARcPSD|18799045
QUESTION 1
Accountants work in a variety of specializations that continue to grow as government

regulations increase and business opportunities expand.
Required:
a. Name the statutory body that govern the national accountancy body that regulate,
develops, supports and enhances the integrity of the profession in Malaysia.
(1 mark)
b. Distinguish between accounting and auditing.

(4 marks)
c. Briefly explain how auditing relates to financial accounting.
(2 marks)
d. For each of the following situations, identify the most likely type of audit and type of
auditor:
i. The auditor observes the inventory counting in the warehouse done by the
client’s staff.
ii. The auditor forms an opinion in the Independent’s Auditors Report on the
financial statement of Actual Talent Bhd.
iii. The auditor conduct a thorough checking on the machines in the factory to
ensure that the serial number is correct.
iv. The recommendation is given in the management letter by the auditor after
conducting the audit on the client’s payroll system.
Present your answers in the following format:
Types of Audit Types of Auditor

i
ii
iii
iv
(8 marks)
(Total: 15 marks)
QUESTION 2
ISA 200 on Overall Objectives of the Independent Auditor and Conduct of an Audit focuses
on the level of assurance provided by an audit and it is clear that there are certain inherent
features of an audit which makes it impossible for an auditor to offer a guarantee.
a. Briefly explain the main objective of financial statement audit.

(2 marks)

lOMoARcPSD|18799045
b. Describe the term reasonable assurance for the auditor in providing opinion on the
financial statements.
(2 marks)
c. Differentiate between internal auditing and external auditing in terms of:
i. Scope of audit
ii. Detection of fraud
iii. Reporting responsibility to
iv. Rights
Present your answers in the following format
Internal auditing External auditing

i Scope of audit
ii Detection of fraud
iii Reporting responsibility to
iv Rights according to
(8 marks)
d. Suggest any TWO (2) examples of compliance audits conducted by internal auditor
in a trading company.
(3 marks)
(Total: 15 marks)
QUESTION 3
A. The corporate landscape has been changing recently and directors need to be aware
of how these changes will impact the business environment they operate in. One
such change is the replacement of the Companies Act 1965 with the new Companies
Act 2016.
a. A company shall lodge with the registrar a statement called an ‘Auditor’s Statement’
without having to lodge the audited financial statement.
Identify any THREE (3) information to be included in the above statement.

(3 marks)
b. Briefly explain any TWO (2) conditions according to Section 266 (4)-(7) which
stipulated the powers of auditor.
(4 marks)
c. State any TWO (2) conditions where the auditor can resign to be the auditor of the
company.
(3 marks)
B. Statutory law is the most important source of law. It is made up of facts that have
received legislative approval from Parliament and obtained the force of the law.

lOMoARcPSD|18799045
Required:
In each of the following circumstances, state with reasons whether the situation
violated or not to the relevant provisions stipulated in the Companies Act 2016.
Present your answer in the following format:
Situation Violated/Not violated Reasons

a.
b.
c.
d.
e.
a. The director of the company, Teguh Batu Bhd has agreed to appoint his former
accountant, Hariz Syahmi (who has resigned a month ago) to be his new auditor in
the next Annual General Meeting which is scheduled to be held in twelve (12)
months.
b. A newly incorporated private company has not appointed any auditor although it is
now thirty (30) days before the submission of the first financial statements to the
Registrar.
c. The director of ES Bhd has appointed an auditor in the general meeting and has
authorized to fix the remuneration of the said auditor.
d. The accounts officer who has long serves the company has reluctant to provide the
documents pertaining to the acquisition of share in the foreign country because the
information is consider being top secret. The auditor adhered to the officer’s request.
e. The auditor of LKF Bhd. has prepared an Independent Auditor’s Report and
mentioned that the financial statements are prepared in accordance with the
applicable financial reporting framework.
(10 marks)
(Total: 20 marks)
(TOTAL: 50 MARKS)

lOMoARcPSD|18799045

COMMON TEST
ANSWER SCHEME
COURSE : AUDITING

lOMoARcPSD|18799045
QUESTION 1
a. Malaysian Institute of Accountants (MIA). √

(1√ x 1 mark = 1 mark)
b. Accounting is the process of identifying, classifying, summarizing and communicating

information about an organisation’s business activities. It is designed to provide financial
information to a wide variety of users. √
Auditing is a systematic process of objectively obtaining and evaluating evidence

regarding assertions about economic actions and events to ascertain the degree of
correspondence between those assertions and established criteria and communicating
the results to interested users. √
(2√ x 2 marks each = 4 marks)
c. Auditing is related to financial accounting since it is the process of lending credibility to

the (accounting) statements prepared by the management or those in charged with
governance. √
(1√ x 2 marks = 2 marks)
d.
Types of Audit Types of Auditor
i Financial statement audit√ External auditor√
ii Financial statement audit√ External auditor√
iii Compliance audit√ Internal auditor√
iv Operational audit√ Internal auditor√
(8√ x 1 mark each = 8 marks)
(Total: 15 marks)
QUESTION 2
a. The main objective of financial statement audit is to obtain reasonable assurance about
whether the financial report as a whole is free from material misstatement, whether due
to fraud or error, thereby enabling the auditor to express an opinion on whether the
financial report is prepared, in all material respects, in accordance with an applicable
financial reporting framework. √
b. Reasonable assurance is a measure of the level of uncertainty that the auditor has
obtained at the completion of the audit. Reasonable but not absolute, indicates that the
auditor is not insurer or guarantor of the correctness of the Financial Statements
Reason for stating reasonable assurance are audit evidence resulted from testing a
sample of population, accounting presentations contain complex estimates and
fraudulent are often difficult to detect. √

lOMoARcPSD|18799045
c.
Internal auditing External auditing

i Scope of audit By management√ Companies Act 2016√
ii Detection of fraud Directly concerned Incidentally concerned
with prevention & with prevention &
detection of fraud√ detection of fraud√
iii Reporting To the Board of To the
responsibility to Directors√ members/shareholder√
iv Rights Determined by the According to section 266
management√ of Companies Act 2016√
d. TWO (2) examples of compliance audits conducted by internal auditor in a trading

company.
i. Check the credit sales are being approved by the Credit Department. √
ii. Confirmed that all money from sales is banked in at the end of the day. √
(Or any other acceptable answers)
(Any 2√ x 1.5 marks each = 3 marks)
(Total: 15 marks)
QUESTION 3
A.
a. THREE (3) information which the auditor has to state in the statement.
1) stating whether the company has in his opinion kept proper accounting records
and other books during the period covered by those accounts √
2) stating whether the Financial Statement have been audited in accordance with
this Act √
3) stating whether the auditor's report on the Financial Statement was made subject
to any qualification or opinion under any applicable auditing standards, or
included comment made under subsection 266(3) and, if so, particulars of the
qualification or comment, √ and;
4) stating whether as at the date to which the Financial Statements has been made
up, the company appeared to have been able to meet its liabilities as and when
the liabilities fall due
(Any 3√ x 1 mark each = 3 marks)
b. Briefly explain any TWO (2) conditions according to Section 266 (4)-(7) which stipulated
the powers of auditor.
1) Right of access to the accounting books and other records including registers of
the co and entitled to require information and explanation as he desires for the
purpose of the audit from any officer of the co and auditor of related co. √
2) auditor for holding co may access the accounting books and other records of its
subsidiary and right to require information and explanation from any officer or
auditor from subsidiary. √
3) the auditor’s report shall be attached to the Financial Statement or Consolidated
Financial Statement, and be read at the general meeting.

lOMoARcPSD|18799045
4) shall entitled to attend any general meeting, and to receive notices and any other
communications in relation to the general meeting. Auditor also entitled to be
heard (due to removal) at any general meeting.
(Any 2√ x 2 marks each = 4 marks)
c. State any TWO (2) conditions where the auditor can resigned to be the auditor of the
company.
Sec 281 (1) :An auditor may resign by giving a written notice to the office at the
registered office. √
Sec 281 (2) : the notice under sec 281 (1) shall bring the end of the auditor’s office after
21 days of the date of the notice. √
Sec 282 (1): the company shall send a copy of the notice to the Registrar within 7 days
from the received date.
(Any 2√ x 1.5 marks each = 3 marks)
B.
Situation Violated/Not Reasons
violated
a. Not violated√ Sec 264(2) Hariz has resigned as the accountant/officer
for the past thirteen (13) months. √
b. Violated√ Sec 267 Appointment of auditors state that the Board
shall appoint an auditor for a newly incorporated private
company at least thirty (30) days before the end of the
period for the submission of the first financial statements
to the Registrar. √
c. Not violated√ Sec 274 The Board shall fixed the auditor’s
remuneration and if not so fixed, by the company. √
d. Violated√ Sec 266 (4) Right of access to the accounting books and
other records including registers of the co and entitled to
require information and explanation as he desires for the
purpose of the audit from any officer of the co and
auditor of related co. √
e. Not violated√ Sec 266 (2) state whether the Financial Statement are
properly drawn up in accordance with the Approved
Accounting Standard, given a true & fair view, and to
report any defect or irregularities.√
(Total: 20 marks)
TOTAL: 50 MARKS

Pyq Aud339 Sem 5 Pyq Jan 2018

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PYQ AUD339 SEM 5 - pyq jan 2018

Accounting (Universiti Teknologi MARA)

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CONFIDENTIAL 1 AC/APR 2019/AUD339

UNIVERSITI TEKNOLOGI MARA

1. This question paper consists of three (3) questions.

4. Please check to make sure that this test pack consists of :

i) the Question Paper

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

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CONFIDENTIAL 2 AC/APR 2019/AUD339

c. Discuss the agency theory in the context of Auditing.

Financial statement audits are conducted by professionals trained in the accounting

b. Differentiate between compliance audit and operational audit.

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CONFIDENTIAL 3 AC/APR 2019/AUD339

a. Identify TWO (2) criterias of a person qualified to be approved by the Ministry of

Situation Violated/Not violated Reason

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CONFIDENTIAL 4 AC/APR 2019/AUD339

© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

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CONFIDENTIAL 1 AC/APR 2019/AUD339

UNIVERSITI TEKNOLOGI MARA

COURSE CODE : AUD339

EXAMINATION : APRIL 2019

TIME : 1 HOUR 30 MINUTES

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CONFIDENTIAL 2 AC/APR 2019/AUD339

i. Preparation of yearly financial i. To state an opinion on the financial

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CONFIDENTIAL 3 AC/APR 2019/AUD339

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CONFIDENTIAL 4 AC/APR 2019/AUD339

i. He is not an approved auditor

c. The Board shall appoint an auditor of the company:

Situation Violated/ Reason

a. Violated √ Section 274 CA 2016: Auditor’s remuneration shall be paid by the

c. Violated √ Section 276(1) CA2016: The members of a company may remove

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CONFIDENTIAL 5 AC/APR 2019/AUD339

(10 √ x 1 mark = 10 marks)

END OF SUGGESTED SOLUTION

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CONFIDENTIAL 1 AC/OCT 2019/AUD339

UNIVERSITI TEKNOLOGI MARA

1. This question paper consists of THREE (3) questions.

i) the Question Paper

5. Answer ALL questions in English.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

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CONFIDENTIAL 2 AC/OCT 2019/AUD339

Audit can also be defined as:

a. Briefly explain the following keywords from the above definition:

e. State any THREE (3) responsibilities of management relating to financial statements.

b. One of the problems associated with agency relationship is the information

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CONFIDENTIAL 3 AC/OCT 2019/AUD339

No. Characteristics Internal auditor External auditor

e. Identify the type of audit applicable in the following situation: