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EXAMINATION PAPER: ACADEMIC SESSION 2014/2015

Campus

International Partners

Faculty

Business

Department

Accounting and Finance

Course Code

ACCO 1152

Course Title

Audit and Assurance (Exam 1)

Level

Duration

TWO HOURS

Date

April/May 2015

Course co-ordinator:

J. E. Spencer-Wood

INSTRUCTIONS TO CANDIDATES
SECTION A: Compulsory question (this carries 10 marks).
SECTION B: Answer THREE of the four questions (each question carries 30
marks).

This is a CLOSED book examination.

April/May 2015
Course Title Audit and Assurance Exam 1
Course Code ACCO 1152

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SECTION A - Compulsory

Question One
Outline and discuss the threats to an auditors independence giving an example
of each.
Total 10 marks

April/May 2015
Course Title Audit and Assurance Exam 1
Course Code ACCO 1152

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SECTION B Answer THREE of the following four questions only
Question Two
An auditors opinion is based upon sufficient appropriate audit evidence.
(a) Analytical procedures have been described as evaluations of financial
information through analysis of plausible relationships among both financial and
non-financial data - ISA/HKSA 520(4)
When undertaking an audit analytical procedures are used, inter alia, at the risk
assessment and planning stages.
How does the auditor employ analytical procedures at the two stages
mentioned above?
(10 marks)
(b) Audit evidence is needed in respect of the truth and fairness of financial
statement assertions.
List and explain five financial statement assertions.
(20 marks)
Total 30 marks
Question Three
You are the accountant at GEM plc and must make a presentation to the marketing
executives in order to give them a clear understanding of the basics and importance of
internal control systems within the company. You intend to cover the key aspects on
PowerPoint slides supported with a more detailed handout.
Required:
Prepare the detailed handouts. They should be bullet-pointed and cover the
following.
(1)
(2)
(3)
(4)
(5)

The meaning of internal control

An explanation of each of the five elements that constitute internal control
The responsibility for internal control
Produce three examples of control activities and what they achieve
How internal control affects the work of the external statutory audit
(Total 30 marks)

April/May 2015
Course Title Audit and Assurance Exam 1
Course Code ACCO 1152

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Question Four
Audit documentation is defined as the record of audit procedures performed, relevant
audit evidence obtained, and conclusions the auditor reached (terms such as working
papers or workpapers are also sometimes used).
ISA (UK and Ireland) 230
Required:
(a) Describe and discuss the objectives of maintaining working papers?
(16 marks)
(b) Give five examples of documents to be found in the Permanent File (of the
working papers). Outline the reasons why each of the documents you
mention is kept by the auditor.
(10 marks)
(c) Give two examples of documents to be found in the Current File (of the
working papers). Outline the reasons why each of the documents you
mention is kept by the auditor.
(4 marks)
Total 30 marks

Question Five
(a) Explain and define materiality in terms of financial statement preparation
(i.e. accounting materiality)
(5 marks)
(b) Define audit performance materiality and compare it to accounting
materiality.
(6 marks)
(c) State the stages during the audit process when audit performance
materiality is reviewed and discuss the reasons for each of these reviews.
(10 marks)
(d) Give three examples of qualitative materiality and discuss why they are
important to the statutory auditor.
(9 marks)
Total 30 marks

April/May 2015
Course Title Audit and Assurance Exam 1
Course Code ACCO 1152

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