AUD589 Test with answer. Individual assessment PDF

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Question 1Required:i. Explain two (2) importance of auditing financial statements. (4 marks)  To provide assistance to the clients in improving financial controls and financial reporting within the business  To detect and prevent fraud and error in accounting recordsii. Explain the term “material ...

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Question 1 Required: i.

Explain two (2) importance of auditing financial statements.  

ii.

(4 marks) To provide assistance to the clients in improving financial controls and financial reporting within the business To detect and prevent fraud and error in accounting records Explain the term “material misstatements”.

   iii.

(4 marks) Information is material if it omission or misstatement could influence users’ decision taken on basis of the financial statements. A mistake in presenting financial information which could arise from errors and/or frauds. Considered as material if the knowledge of misstatement would affect a decision of a reasonable user of the financial statements. Elaborate three (3) differences between accounting and auditing. (6 marks) Accounting Creates financial statements - Accountant Responsibility of management of the client Accountant – knowledge on the accounting principles and rules/regulations Process of recording, classifying and summarizing economic events in a logical manner for the purpose of providing financial information for decision making by the various users.

iv.

Auditing Enhance the credibility of financial statements Responsibility of the independent auditor Auditor – knowledge on the accounting and auditing principles and rules/regulations Involve the process of accumulation and interpretation of audit evidence, evaluating the results and problems before expressing independent audit opinion on the financial statements.

Describe three (3) types of auditors and their responsibilities. 

(6 marks) External auditor / Chartered Accountant - primary responsibility: provide a true and fair opinion on the financial statements.



Internal auditor - employee of the organization itself who carries out an appraisal of the accounting and operations of the organization.



Forensic auditor - ‘investigator’ with special skill to elicit useful information from the suspected wrongdoers or witnesses. (Total: 20 marks)

Question 2 A.

Companies Act 2016 contains provisions concerning the auditors, including on the appointment, termination, qualification, disqualification as well as their duties and responsibilities. Required: i.

State two (2) criteria to become an approved company auditor. (2 marks) - An approved auditor is a qualified person approved by the Ministry of Finance to act as an auditor, is of good character and competent to perform the duties of an auditor under the Companies Act. A person plan to be an approved company auditor must have a professional accountancy qualification with adequate practical training before being recognized as MIA member holding the designation of public or licensed accountants.

ii.

Define ‘chartered accountant’. (2 marks) Chartered accountant (CA) is an international accounting designation granted to accounting professionals.

 iii.

Explain two (2) duties that are expected to be performed by an auditor. (4 marks) By refer to section 266, the duties of auditor are:1) report to the members on the financial statements, the accounting and other records. 2) Express opinion in the report on the true and fair view of financial statements, the compliance with the approved accounting standards, the defect or irregularity in the financial statements (if any) and the proper keeping of accounting and other records and the registers.

iv. Justify, with one (1) reason, why a person who has been convicted or involved in any offence involving fraud or dishonesty cannot be appointed as an auditor. (2 marks)  Because a person who has been convicted or involved in any offence involving fraud or dishonesty punishable with imprisonment for three months or more....