QUESTION 1 Many countries have now made money laundering a criminal offence. In some countries, such as the UK. Australia, Singapore and the USA, the criminal offenses include those directed at accountants. In the UK, the basic requirements are for accountants to kecp records of clients' identity and to report suspicions of money laundering to the National Crime Agency (NCA). These obligations apply both to firms and to individuals. A firm must establish anti-money laundering programmes which help to reduce to the possible barest minimum, the impact of money laundering on the firm. There are specific regulatory obligations imposed on accountants and auditors in relation to detecting and reporting money laundering activities. As the audit manager of Queenstar Consults, you have been asked to provide a training session to the new audit juniors on auditors' responsibilities in relation to money lausdering. Required: (a) Prepare briefing notes to be used at your training session in which you: i. Explain the term 'money laundering'. Mllustrate your explanation by explaining the stages of the money laundering process. 6 Marks ii. Explain four (4) policies and procedures that a firm of Chartered Accountants should establish in order to meet its responsibilities in relation to money laundering. 4 Marks (b) Discuss four (4) conditions for the issuance of an unmodified audit opinion 5 Marks (Total: 15 Marks) QUESTION 2 (a) Internal auditing is an appraisal or monitoring activity established within an entity as a service to the entity. It functions by, amongst other things, examining, evaluating and reporting to management and the directors on the adequacy and effectiveness of components of the accounting and internal control systems. Required: (i) Discuss the reporting lines of the Internal Auditor(s) within a comporate institution 2 Marks (ii) Discuss four (4) distinctions between the Internal and External Auditors. Please provide your answer in a tabular form with headings clearly labelled as "Internal Auditors" and "External Auditors" 4 Marks (iii) Discuss four (4) types of assignments that internal auditors can be engaged in by corporate institutions 4 Marks (b) An exit meeting is held at end of the internal audit engagement after a draft report has been produced. The people at the mecting are likely to include both the operational staff who understand the workings of the implementations of the corrective actions identificd and management team. Required: (i) Discuss three (3) objectives of the Exit Mecting 3 Marks (ii) Identify two (2) people to whom the Internal Auditor's final report can be distributed 2 Marks (Total: 15 Marks) QUESTION 3 (a) As far as fraud is concemed the computer offers both opportunities foe and safeguands against fraud. It must be acknowledged that while computers have opened up new oppotunities for fraad they have also played a positive role in preventing fraud. Where reconds are programmed it is moch hander for individual fraudulent entries to slipped undetected in the system. Auditors should, however, be aware of the type of fraud that can happen within computerized systems. Many of the fears regarding sophisticated manipulations of programs are unfounded. Most frauds are facilitated by weakness in input and acoess controls permitting the input of bogus or altered transactions. Required: (i) Discuss five (5) types / classifications of computer related frad 5 Marks (ii) Discuss five (5) advantages of automated working paper paclages in an audit 5 Marks (b) Fraud comprises both the use of deception to obtain an unjust of illegal financial advantage and intentional misinterprefations affecting the financial statements by one of more individuals, among managers, employees or third partics. It is only court of competent jurisciction that can adjudge an act to be fraudulent. Auditors therefore deal with suspected frand rather than proven fraud. Required: Discuss five (5) indicators of fraud within corporate entities 5 Marks (Total: 15 Marks) QUESTION 4 (a) Discuss the following terminologies as relates to fraud and crroes: (i) 'According to rule' administrative corruption (ii) 'Against-the-rule' administrative comuption (iii) Conflict of interest (iv) Tum around sales (v) Business diversions 5 Marks (b) Discuss the following terminologies as relates to audit sampling: (i) Tolerable errors (ii) Tolerable deviation rate (iii) Extrapolation (iv) Sampling risk (v) Non-sampling risk 5 Marks (e) Practice management deals with how an audit firm should be managod and controlled. It involves issues like; Fees, Advertising, Tendering, Appointment considerations and Quality control. Required: with reference to the above, discuss two (2) requirements / rules each of asdit firms in relation toc (i) Audit fee determination (ii) Advertisement 5 Marks (Total: 15 Marks) QUESTION 1 Many countries have now made money laundering a criminal offence. In some countries, such as the UK. Australia, Singapore and the USA, the criminal offenses include those directed at accountants. In the UK, the basic requirements are for accountants to kecp records of clients' identity and to report suspicions of money laundering to the National Crime Agency (NCA). These obligations apply both to firms and to individuals. A firm must establish anti-money laundering programmes which help to reduce to the possible barest minimum, the impact of money laundering on the firm. There are specific regulatory obligations imposed on accountants and auditors in relation to detecting and reporting money laundering activities. As the audit manager of Queenstar Consults, you have been asked to provide a training session to the new audit juniors on auditors' responsibilities in relation to money lausdering. Required: (a) Prepare briefing notes to be used at your training session in which you: i. Explain the term 'money laundering'. Mllustrate your explanation by explaining the stages of the money laundering process. 6 Marks ii. Explain four (4) policies and procedures that a firm of Chartered Accountants should establish in order to meet its responsibilities in relation to money laundering. 4 Marks (b) Discuss four (4) conditions for the issuance of an unmodified audit opinion 5 Marks (Total: 15 Marks) QUESTION 2 (a) Internal auditing is an appraisal or monitoring activity established within an entity as a service to the entity. It functions by, amongst other things, examining, evaluating and reporting to management and the directors on the adequacy and effectiveness of components of the accounting and internal control systems. Required: (i) Discuss the reporting lines of the Internal Auditor(s) within a comporate institution 2 Marks (ii) Discuss four (4) distinctions between the Internal and External Auditors. Please provide your answer in a tabular form with headings clearly labelled as "Internal Auditors" and "External Auditors" 4 Marks (iii) Discuss four (4) types of assignments that internal auditors can be engaged in by corporate institutions 4 Marks (b) An exit meeting is held at end of the internal audit engagement after a draft report has been produced. The people at the mecting are likely to include both the operational staff who understand the workings of the implementations of the corrective actions identificd and management team. Required: (i) Discuss three (3) objectives of the Exit Mecting 3 Marks (ii) Identify two (2) people to whom the Internal Auditor's final report can be distributed 2 Marks (Total: 15 Marks) QUESTION 3 (a) As far as fraud is concemed the computer offers both opportunities foe and safeguands against fraud. It must be acknowledged that while computers have opened up new oppotunities for fraad they have also played a positive role in preventing fraud. Where reconds are programmed it is moch hander for individual fraudulent entries to slipped undetected in the system. Auditors should, however, be aware of the type of fraud that can happen within computerized systems. Many of the fears regarding sophisticated manipulations of programs are unfounded. Most frauds are facilitated by weakness in input and acoess controls permitting the input of bogus or altered transactions. Required: (i) Discuss five (5) types / classifications of computer related frad 5 Marks (ii) Discuss five (5) advantages of automated working paper paclages in an audit 5 Marks (b) Fraud comprises both the use of deception to obtain an unjust of illegal financial advantage and intentional misinterprefations affecting the financial statements by one of more individuals, among managers, employees or third partics. It is only court of competent jurisciction that can adjudge an act to be fraudulent. Auditors therefore deal with suspected frand rather than proven fraud. Required: Discuss five (5) indicators of fraud within corporate entities 5 Marks (Total: 15 Marks) QUESTION 4 (a) Discuss the following terminologies as relates to fraud and crroes: (i) 'According to rule' administrative corruption (ii) 'Against-the-rule' administrative comuption (iii) Conflict of interest (iv) Tum around sales (v) Business diversions 5 Marks (b) Discuss the following terminologies as relates to audit sampling: (i) Tolerable errors (ii) Tolerable deviation rate (iii) Extrapolation (iv) Sampling risk (v) Non-sampling risk 5 Marks (e) Practice management deals with how an audit firm should be managod and controlled. It involves issues like; Fees, Advertising, Tendering, Appointment considerations and Quality control. Required: with reference to the above, discuss two (2) requirements / rules each of asdit firms in relation toc (i) Audit fee determination (ii) Advertisement 5 Marks (Total: 15 Marks)