COMSATS University Islamabad

Lahore Campus

Sessional I – SP2021
Course Title: Auditing Course Code: MGT-370 Credit Hours: 3(3,0)
Course Instructor/s: Rashid Waheed Qureshi Programme BS AF
Semester: 4th Batch: SP19-BAF Section: Name:
A Date: 2021
Time Allowed: 60 minutes Maximum Marks: As per CUI Policy
Student’s Name: Reg. No.

Important Instructions / Guidelines:

 Read all the questions carefully before solving the paper.

 Solve Paper on A4 size sheet. (Hand written)
 Solution is acceptable in pdf file only
 email i.e. rwqureshi@cuilahore.edu.pk
 Upload file CU-online in given time (10 minutes allowed to upload the file)
 (late submission may not be acceptable)
 Use Black Ink/ Ball pen
 Send solved file in sequence (preferable with page numbers)
 Attempt all the Questions.

Question # 1. (10)

Dolphin Surf & Leisure Holidays Pty Ltd (Dolphin) is a resort company based on the Great Barrier
Reef. Its operations include boating, surfing, diving and other leisure activities, a backpackers’ hostel,
a family hotel and a five-star resort. Justin and Sarah Morris own the majority of the shares in the
Morris Group which controls Dolphin. Justin is the chairman of the board of directors of both
Dolphin and the Morris Group, and Sarah is a director of both companies as well as the CFO of
Dolphin.
In February 2017, Justin Morris approached your audit firm, Clarke Partners, to carry out the Dolphin
audit for the year ended 30 June 2017. Dolphin has not been audited before but this year the audit has
been requested by the company’s bank and a new private equity investor group which has just
acquired a 20 per cent share of Dolphin. You know that one of the partners at Clarke Partners went to
school with Justin and has been friends with both Justin and Sarah for many years.

Required:
(a) Identify and explain the significant threats to independence for Clarke Partners in accepting the
audit of Dolphin.
(b) Explain any relevant and practical safeguards that Clarke Partners could implement to reduce the
threats.
 Continued…..
Question # 2. (10)

Elecnet is an electricity distribution company based in a large capital city. Its business is to manage
the electricity assets, including poles, wires and other equipment, that are used to deliver electricity to
more than 500000 retail and business customers in the city. Pole, wire and substation maintenance
and improvements are a large part of the company’s operations and teams of highly trained
technicians are used for both planned work and emergency response activities. Emergency response
is required when storms or fires bring down power lines, the power must be turned off at the direction
of police, or the electricity supply fails for any reason.
Each team comprises several vehicles (vans and trucks) and uses additional heavy equipment, such as
cherry pickers, cranes and diggers, as required. Each vehicle carries a core set of specialised parts and
tools and additional items are obtained as required from the stores, located in a large warehouse in the
northern suburbs. The warehouse is staffed on a 24-hour basis to assist night maintenance (designed
to minimise disruption to business customers) and emergency response.
Required
(a) Make a list of the potential problems that could occur in Elecnet’s maintenance and improvements
program.
(b) Suggest ways that good internal control over parts, equipment and labour could help Elecnet
avoid these problems.