Question 1 You are an auditor at KHQ & Co. and are part of the team set to audit the financial statements of City Properties Limited (CPL) for the year ended 30 June 2018. CPL's principal activity is letting out commercial and residential properties. The audit supervisor, Paul, has briefed you and the audit team putting emphasis on having detailed and well referenced working papers on file to enable KHQ & Co. achieve the objectives of the audit. He also reminded the audit team that an auditor is expected to exercise professional judgment in planning and performing an audit of financial statements. Required: (a) Explain to your audit team members the: (i) purpose of working papers in relation to the audit of CPL. (8 marks) (ii) expected content on each working paper on CPL's audit file. (4 marks) (iii) overall objectives of an audit of CPL's financial statements. (2 marks) (b) Describe the circumstances where professional judgment will be required during the audit of CPL's financial statements. (6 marks) (Total 20 marks) Question 2 Better Now Limited (BNL) is in the business of manufacturing body lotions, facial creams and hair oils. Your audit firm, JJK & Co. has been appointed the auditors of BNL. During the last week of November 2018, BNL conducted an inventory count and JJK & Co. was invited to witness .Your audit supervisor assigned you to lead the team that witnessed the inventory count. Required: (a) Identify the audit objectives of witnessing the BNL inventory count exercise. (4 marks) (b) Explain the types of audit evidence you will be expected to obtain at BNL during the inventory count. (4 marks) (c) Explain the procedure you will carry out before the inventory count. (8 marks) (d) Explain the ways in which firms like JJK & Co. may be appointed auditors of an entity. (4 marks)

Question 3 Your firm BTL & Co. where you are employed as an auditor has been appointed the auditor of TMZ Micro Finance Limited (TFL). It is the first time BTL & Co. is auditing a client in a Micro finance business and therefore understanding the client is important. TFL uses loan performer, a computerised accounting software. The audit supervisor informed you that there is need for an overall audit strategy to enable BTL & Co. set the scope, timing and direction of the audit. BTL & Co. plans to purchase electronic audit files for use on such audits. Required: (a) Explain to your audit supervisor the matters BTL & Co should consider in gaining an understanding of TFL's business. (8 marks) (b) Discusswithyourauditsupervisorthefactorstoconsiderinestablishingan audit strategy for TFL. (c) Explain the benefits of using electronic audit files to BTL & Co.

Question 4 You are an auditor with ZX & Co. and have been assigned to work on the audit of Paper Industries Ltd (PIL), a company that produces scholastic materials such as exercise books, papers and box files. Your audit supervisor has cautioned you on number of matters which may threaten or appear to threaten your independence. He also reminded you that not all audit evidence is reliable and that understanding PIL's systems is very important. Required: (a) Explain the control procedures you would expect to find at PIL. (b) Explain the categories of reliable audit evidence you would be expected to collect for the audit of PIL. (4 marks) (c) Explain the possible ethical issues that can threaten your independence at PIL. (6 marks)

Question 5 Your firm HTL & Co. is the auditor of Green Diary Farm Limited (GDF), a family owned business. You are part of the team auditing GDF's financial statements for the year ended 30 June 2018. During your review of GDF's records, you discover that Tom, a family member and director gave a loan of Shs 500 million to GDF to purchase and install a milk cooling plant at the farm in May 2018. This information is not captured in the financial statements. Your inquiry from GDF's internal auditor confirmed that actually this transaction was not captured in the accounting system. Required: (a) Describe the assertions that should be made by GDF's management in relation to the purchases system cycle of the farm. (6 marks) (b) Explain to your audit team members the indicators of related party transactions during the course of an audit of financial statements. (8 marks) (c) Explain the expected role of the internal audit department at GDF. (6 marks) (Total 20 marks) Question 6 Zee & Co. has been appointed the auditors of Danks Ltd for the year ended 30 September 2018. Danks Ltd is in courier business. The company has large account balances for assets and liabilities. Your audit supervisor has assigned you to handle the assets and liabilities balances. He has informed you that Danks Ltd has an internal audit department and Zee & Co intends to rely on their work. "We will also need to circularize the trade receivables as third party evidence is persuasive." he asserted.

It Required: (a) Explain the audit objectives of the following financial statement assertions for assets. (i) Existence (ii) Rights and obligations (iii) Completion. (iv) Valuation and allocation (2 marks) (2 marks) (2 marks) (2 marks) (b) Explain the procedure that should be followed in making external confirmations for the trade receivables of Danks Ltd. (6 marks) (c) Explain the circumstances under which Zee & Co may rely on the work of Dank Ltd's internal audit department. (6 marks)

Question 1 You are an auditor at KHQ & Co. and are part of the team set to audit the financial statements of City Properties Limited (CPL) for the year ended 30 June 2018. CPL's principal activity is letting out commercial and residential properties. The audit supervisor. Paul. has briefed you and the audit team putting emphasis on having detailed and well referenced working papers on file to enable KHQ & Co. achieve the objectives of the audit. He also reminded the audit team that an auditor is expected to exercise professional judgment in planning and performing an audit of financial statements. Required: (a) Explain to your audit team members the: (i) purpose of working papers in relation to the audit of CPL. (8 marks) (ii) expected content on each working paper on CPL's audit file. (4 marks) (iii) overall objectives of an audit of CPL's financial statements. (2 marks) (b) Describe the circumstances where professional judgment will be required during the audit of CPL's financial statements. (6 marks) (Total 20 marks) Question 2 Better Now Limited (BNL) is in the business of manufacturing body lotions. facial creams and hair oils. Your audit firm. JJK & Co. has been appointed the auditors of BNL. During the last week of November 2018, BNL conducted an inventory count and JJK & Co. was invited to witness .Your audit supervisor assigned you to lead the team that witnessed the inventory c0unt. Required: (a) identify the audit objectives of witnessing the BNL inventory count exercise. (4 marks) (b) Explain the types of audit evidence you will be expected to obtain at BNL during the inventory count. (4 marks) (c) Explain the procedure you will carry out before the inventory count. (8 marks) (d) Explain the ways in which firms like JJK & (30. may be appointed auditors of an entity. (4 marks) (Total 20 marks)