Final Exam
ANSWER ALL QUESTIONS
QUESTION 1 (23 MARKS:41 MINUTES)
A. Evidence comes in various types and has different degrees of reliability. Following are some statements that compare various types of evidence.
a. A bank confirmation versus observation of the segregation of duties between cash receipts and recording payment in the accounts receivable subsidiary ledger b. An auditor recalculation of depreciation versus examination of raw material requisitions c. A bank statement included in the entity’s records versus shipping documents d. Physical examination of share certificates versus physical examination of inventory components for a personal computer.
REQUIRED:
For each situations, indicate whether the first or second type of evidence/audit procedure is more reliable. Provide a rationale for your choice. (8 marks)
B. Inspection of records and documents relates to the auditor’s examination of entity accounting data and corroborating audit evidence. One issue that effects the reliability of documentary evidence is whether the documents are internal or external. Following are examples of documentary evidence: 1. Duplicate copies of sales invoice 2. Purchase orders 3. Bank statements 4. Remittance advice from customers 5. Suppliers’ invoice 6. Material requisition forms 7. Overhead cost allocation sheets 8. Shipping documents 9. Supplier’s statement 10. Long term loan agreements
REQUIRED:
a. Classify each document as internal or external evidence (5 marks)
b. Classify each document as to its reliability (high, moderate or low) (10 marks)
QUESTION 2(20 MARKS:36 MINUTES)
A. Although the auditors can collect appropriate and sufficient audit evidence during the audit work, it does not necessarily support the auditors opinion if it is not documented properly and systematically. Discuss.
(10 marks)
B. List FIVE (5) characteristics and purpose of
QUESTION 1 (23 MARKS:41 MINUTES)
A. Evidence comes in various types and has different degrees of reliability. Following are some statements that compare various types of evidence.
a. A bank confirmation versus observation of the segregation of duties between cash receipts and recording payment in the accounts receivable subsidiary ledger b. An auditor recalculation of depreciation versus examination of raw material requisitions c. A bank statement included in the entity’s records versus shipping documents d. Physical examination of share certificates versus physical examination of inventory components for a personal computer.
REQUIRED:
For each situations, indicate whether the first or second type of evidence/audit procedure is more reliable. Provide a rationale for your choice. (8 marks)
B. Inspection of records and documents relates to the auditor’s examination of entity accounting data and corroborating audit evidence. One issue that effects the reliability of documentary evidence is whether the documents are internal or external. Following are examples of documentary evidence: 1. Duplicate copies of sales invoice 2. Purchase orders 3. Bank statements 4. Remittance advice from customers 5. Suppliers’ invoice 6. Material requisition forms 7. Overhead cost allocation sheets 8. Shipping documents 9. Supplier’s statement 10. Long term loan agreements
REQUIRED:
a. Classify each document as internal or external evidence (5 marks)
b. Classify each document as to its reliability (high, moderate or low) (10 marks)
QUESTION 2(20 MARKS:36 MINUTES)
A. Although the auditors can collect appropriate and sufficient audit evidence during the audit work, it does not necessarily support the auditors opinion if it is not documented properly and systematically. Discuss.
(10 marks)
B. List FIVE (5) characteristics and purpose of