QUESTION 1 The Auditing Practices Board (APB) of UK, which is a part of the Financial Reporting Council, prepares standards and guidanee for external auditors and reporting accountants in the United Kingdom and Republic of Ireland, It is committed to leading the development of auditing practice so as to establish high standards of auditing, meet the developing needs of users of financial information, and ensure public confidence in the auditing process. Although its remit relates to the UK and Ireland it pays close attention to the activities of the International Audit and Assurance Standards Board (IAASB) as it is supportive of the harmonization of auditing standards internationally. Current UK and Irish standards are the ISAs as issued by IAASB, supplemented where necessary by additional standards and guidance to maintain the requirements and clarity of the previous UK standards, and the finalisation of the EC's Statutory Audit Directive in June 2006, which provides the platform for the adoption of ISAs issued by the LAASB throughout Europe. The APB of UK has outlined several definitions in the area of audit, some of which includes definitions of Audit and Internal Control Systems. Required: With reference to the above statement, (a) Define Audit as per the Audit Practices Board of UK 3 Marks (b) With reference to your definition in (a) above, discuss the following clements: (i) Independence (ii) Expression of an opinion (iii) Financial Statements (iv) Enterprise / Entity (v) Appointed Auditor (vi) Compliance 9 Marks (c) Value for Money (VFM) Audits have become very topical in current audit approaches. To most auditors, VFM is a strong tool to fight fraud, waste, and all forms of mismanagement. Whereas VFM is mainly applicable in the public sector, its application has somewhat been useful to private sector audits. As an MSC (Accounting and Finance) student of Accra Business School, discuss the elements of the VFM Audit. 3 Marks (Total: 15 Marks) QUESTION 2 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. (A) Question on Advertising of Audit Firm "At ABS L.L.P. you will get the best quality audit process on this planet. Unlike some other firms, we care about you, our client. We go the extra mile - you will always get the audit opinion you want. As well as audit we offer a range of other services, so come to ABS ACCA LLP - you will not regret it. Simply the best". Have you had enough of your accountant charging you too much for poor quality services? Does your business need a kick-start? Look no further, ABS ACCA LIP provides the most comprehensive range of finanee and accountancy services in the country as well as having tax team in the country who are just waiting to save you money. Still not sure? We guarantee to be cheaper than your existing service provider and for the month of January we are offering free business advice to all new audit chients. Drop in and see us at your local office for free consultation. ABS ACCA LLP, simply the best Required: The above is an adven which ABS ACCA LLP intends to post on its Official Website in an effort to boost its visibility in the Audit space. As an MSC (Accounting and Finance) student of Acera Business School, having taken a course in International Audit and Assurance, (a) Discuss the general position of the Intemational Federation of Accountants (IFAC) on Advertising / Marketing of Professional Services 2 Marks (b) Peruse the above advert and comment on the ethical and other professional issues raised in the intended Advert 5 Marks (B) (Question on Quality Control within Audit Frns) Given the importance of the work done by accountants and auditors, and the reputational damage to both the firm and the profession when that work is of poor quality, it is clear that Quality Control is extremely important. Issues of quality are broadly discussed under two main headings, namely (i) firm-wide controls and (ii) engagement-specific controls. Required: (a) Discuss four (4) Firm-wide Controls to be instituated by an Audit Firm to ensure Quality Control 4 Marks (b) Discuss four (4) Engagement-specific Controls to be instituted by an Audit Firm to ensure Quality Control. 4 Marks (Total: 15 Marks) Page 3 of 5 QUESTION 3 (A) Audit sampling" (sampling) involves the application of audit procedures to less than 100% of items within a population of audit relevance /(a class of transactions or account balance) such that all sampling units have a chance of selection. It is testing, observing or measuring part of a population in ofder to gain information about the entire population. Audit sampling enables the auditor to obtain and evaluale audit evidence about some characteristics of the items selected in order to form or assist in forming a conclusion concerning the population from which the sample is drawn. Audit sampling can use either a statistical or a non-statistical approach. (ISA 530). The objective is to select a sample which is truly representative of the population of sampling units from which the sample is chosen so that the findings of audit tests on the sample can validly be assumed to apply to the population so that an overall conclusion can be drawn. Required: (a) Discuss two (2) requirements for true representation of a sample. (2 Marks) (b) Discuss the following terminologies as relates to audit sampling: (i) Statistical sampling (ii) Non-statistical sampling (iii) Sampling risk (iv) Non-sampling risk (4 Marks) (B) Users of financial statements are increasingly demanding the publication of more financial data within peblished accounts. The "annual report' containing the financial statements of a company often include financial and nonfinancial information ealled "other information". Guidance bas been given to auditors as repards their responsibility for this "other information" by the International Auditing and Assurance Standards Board, but users of financial statements are unlikely to be aware of these responsibilities and will, therefore assume that all published information shows "a true and fair view". Required: (a) Explain the responsibilities of the auditor for the 'other information' coetained in the annual scport of a company. (3 Marks) (b) Explain the action the auditor will take if he found that an item in the "other information" was misleading" (3 Marks) (c) Discuss three (3) circumstances under which an auditor will issue an unmodified audit report If, after acecpting the audit engagement, the auditor becomes aware that management has imposed a limitation on the scope of the audit that he considers likely to result in the need to express a qualified opinion or to disclaim an opinion on the financial statement, the auditor should request that management remove the limitation. If management refuses to remove the limitation, then he should communicate the matter to those charged with governance, unless all of those charged with govemance are involved in managing the entity, and determine whether it is possible to perform alternative procedures to obtain sufficient appropriate avdit evidence. Required: Discuss the opinion to be issued by the auditor if: (a) The auditor concludes that the possible effects on the financial statement of undetected misstatements, if any, could be material but not pervasive. 1.5 Marks (b) The auditor concludes that the possible effects on the financial statement of undetected misstatements, if any, could be both material and pervasive. 1.5 Marks (c) Where a limitation identified by the auditor is so large that the auditor is unable to give an opinion. 1.5 Marks (d) The client is unable to provide evidence to support the greater portion of issues identified. 1.5 Marks (e) Discuss the circumstances under which the auditor will include the following paragraphs in an audit report: (i) Emphasis of Matter paragraph 1.5 Marks (ii) Other Matter paragraph 1.5 Marks (f) Discuss two (2) advantages of a standardized Audit Report 3 Marks (g) Define Audit Risk and discuss briefly the various elements of the audit risk model 3 Marks (Total: 15 Marks) QUESTION 1 The Auditing Practices Board (APB) of UK, which is a part of the Financial Reporting Council, prepares standards and guidanee for external auditors and reporting accountants in the United Kingdom and Republic of Ireland, It is committed to leading the development of auditing practice so as to establish high standards of auditing, meet the developing needs of users of financial information, and ensure public confidence in the auditing process. Although its remit relates to the UK and Ireland it pays close attention to the activities of the International Audit and Assurance Standards Board (IAASB) as it is supportive of the harmonization of auditing standards internationally. Current UK and Irish standards are the ISAs as issued by IAASB, supplemented where necessary by additional standards and guidance to maintain the requirements and clarity of the previous UK standards, and the finalisation of the EC's Statutory Audit Directive in June 2006, which provides the platform for the adoption of ISAs issued by the LAASB throughout Europe. The APB of UK has outlined several definitions in the area of audit, some of which includes definitions of Audit and Internal Control Systems. Required: With reference to the above statement, (a) Define Audit as per the Audit Practices Board of UK 3 Marks (b) With reference to your definition in (a) above, discuss the following clements: (i) Independence (ii) Expression of an opinion (iii) Financial Statements (iv) Enterprise / Entity (v) Appointed Auditor (vi) Compliance 9 Marks (c) Value for Money (VFM) Audits have become very topical in current audit approaches. To most auditors, VFM is a strong tool to fight fraud, waste, and all forms of mismanagement. Whereas VFM is mainly applicable in the public sector, its application has somewhat been useful to private sector audits. As an MSC (Accounting and Finance) student of Accra Business School, discuss the elements of the VFM Audit. 3 Marks (Total: 15 Marks) QUESTION 2 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. (A) Question on Advertising of Audit Firm "At ABS L.L.P. you will get the best quality audit process on this planet. Unlike some other firms, we care about you, our client. We go the extra mile - you will always get the audit opinion you want. As well as audit we offer a range of other services, so come to ABS ACCA LLP - you will not regret it. Simply the best". Have you had enough of your accountant charging you too much for poor quality services? Does your business need a kick-start? Look no further, ABS ACCA LIP provides the most comprehensive range of finanee and accountancy services in the country as well as having tax team in the country who are just waiting to save you money. Still not sure? We guarantee to be cheaper than your existing service provider and for the month of January we are offering free business advice to all new audit chients. Drop in and see us at your local office for free consultation. ABS ACCA LLP, simply the best Required: The above is an adven which ABS ACCA LLP intends to post on its Official Website in an effort to boost its visibility in the Audit space. As an MSC (Accounting and Finance) student of Acera Business School, having taken a course in International Audit and Assurance, (a) Discuss the general position of the Intemational Federation of Accountants (IFAC) on Advertising / Marketing of Professional Services 2 Marks (b) Peruse the above advert and comment on the ethical and other professional issues raised in the intended Advert 5 Marks (B) (Question on Quality Control within Audit Frns) Given the importance of the work done by accountants and auditors, and the reputational damage to both the firm and the profession when that work is of poor quality, it is clear that Quality Control is extremely important. Issues of quality are broadly discussed under two main headings, namely (i) firm-wide controls and (ii) engagement-specific controls. Required: (a) Discuss four (4) Firm-wide Controls to be instituated by an Audit Firm to ensure Quality Control 4 Marks (b) Discuss four (4) Engagement-specific Controls to be instituted by an Audit Firm to ensure Quality Control. 4 Marks (Total: 15 Marks) Page 3 of 5 QUESTION 3 (A) Audit sampling" (sampling) involves the application of audit procedures to less than 100% of items within a population of audit relevance /(a class of transactions or account balance) such that all sampling units have a chance of selection. It is testing, observing or measuring part of a population in ofder to gain information about the entire population. Audit sampling enables the auditor to obtain and evaluale audit evidence about some characteristics of the items selected in order to form or assist in forming a conclusion concerning the population from which the sample is drawn. Audit sampling can use either a statistical or a non-statistical approach. (ISA 530). The objective is to select a sample which is truly representative of the population of sampling units from which the sample is chosen so that the findings of audit tests on the sample can validly be assumed to apply to the population so that an overall conclusion can be drawn. Required: (a) Discuss two (2) requirements for true representation of a sample. (2 Marks) (b) Discuss the following terminologies as relates to audit sampling: (i) Statistical sampling (ii) Non-statistical sampling (iii) Sampling risk (iv) Non-sampling risk (4 Marks) (B) Users of financial statements are increasingly demanding the publication of more financial data within peblished accounts. The "annual report' containing the financial statements of a company often include financial and nonfinancial information ealled "other information". Guidance bas been given to auditors as repards their responsibility for this "other information" by the International Auditing and Assurance Standards Board, but users of financial statements are unlikely to be aware of these responsibilities and will, therefore assume that all published information shows "a true and fair view". Required: (a) Explain the responsibilities of the auditor for the 'other information' coetained in the annual scport of a company. (3 Marks) (b) Explain the action the auditor will take if he found that an item in the "other information" was misleading" (3 Marks) (c) Discuss three (3) circumstances under which an auditor will issue an unmodified audit report If, after acecpting the audit engagement, the auditor becomes aware that management has imposed a limitation on the scope of the audit that he considers likely to result in the need to express a qualified opinion or to disclaim an opinion on the financial statement, the auditor should request that management remove the limitation. If management refuses to remove the limitation, then he should communicate the matter to those charged with governance, unless all of those charged with govemance are involved in managing the entity, and determine whether it is possible to perform alternative procedures to obtain sufficient appropriate avdit evidence. Required: Discuss the opinion to be issued by the auditor if: (a) The auditor concludes that the possible effects on the financial statement of undetected misstatements, if any, could be material but not pervasive. 1.5 Marks (b) The auditor concludes that the possible effects on the financial statement of undetected misstatements, if any, could be both material and pervasive. 1.5 Marks (c) Where a limitation identified by the auditor is so large that the auditor is unable to give an opinion. 1.5 Marks (d) The client is unable to provide evidence to support the greater portion of issues identified. 1.5 Marks (e) Discuss the circumstances under which the auditor will include the following paragraphs in an audit report: (i) Emphasis of Matter paragraph 1.5 Marks (ii) Other Matter paragraph 1.5 Marks (f) Discuss two (2) advantages of a standardized Audit Report 3 Marks (g) Define Audit Risk and discuss briefly the various elements of the audit risk model 3 Marks (Total: 15 Marks)