QUESTION ONE

Corporate governance is said to be the way companies are run and controlled. The principle behind corporate governance is that owners of companies employ managers to take care of their interests. However, in situations like this a principal and agent relationship is entered into between the shareholders of the company as owners of the resources and the managers who work for them and execute the daily running of the company.

There are usually challenges in running companies whose owners are not available everyday resulting in moral hazards such as remoteness, complexity of operations, conflict of interest and consequence of error among others.

Corporate governance was largely for a long time ignored until the collapse of Enron an energy giant in the United States of America in 2000/2001 after taking advantage of the weaknesses in the principal/agent relationship process.

Required:

Discuss and describe any four (4) fundamental changes that were brought by the Sarbanes Oxley Act of 2002 that introduced the best practices regarding the management of corporate institutions after the collapse of Enron in 2001. (25 marks)

QUESTION TWO

The code of professional ethics was anchored upon fundamental principles and general safeguards and these were introduced so that accounting and auditing practitioners and professionals apply the spirit of the code to every day practice.The framework and principles would be of little use if they could not be enforced. In this regard, all Professional bodies including ACCA therefore reserve the right to discipline its members who infringe the rules through a process of disciplinary hearings which can result if found wanting in either one either being; fined, suspended or indeed their membership withdrawn.

Required:

i.Identify and describe the five (5) fundamental principles of audit professionals (15 marks)

ii.Identify and describe the three (3) general safeguards of the profession (10 marks)

[Total = 25 marks]

QUESTION THREE

ISA 315 Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and its Environment

a.Explain the benefits of understanding the Entity and its Environment (25 marks)

QUESTION FOUR

ISA 210 Agreeing the terms of audit engagements. Accepting new audit engagements is an important part in the engagement of an auditor. If mishandled may result in serious breakdown in communicating the final results of the audit.

Required:

b.Describe five (5) aspects that should be considered in accepting a new engagement. (25 marks)