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Spring 2015 Q4

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5 views

Spring 2015 Q4

Uploaded by

anoushaiftikhar02
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Certificate in Accounting and Finance Stage

Examinations
The Institute of 2 March 2015
Chartered Accountants 3 hours – 100 marks
of Pakistan Additional reading time – 15 minutes

Audit and Assurance


Audit and Assurance Page 2 of
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Q.4 Mineral Limited (ML) has incorporated a liability for gratuity payable to its employees on
the basis of actuarial valuation carried out by Professionals Limited (PL). As the audit
partner of ML you are not satisfied with the valuation report prepared by PL, and have
decided to appoint Experts Limited (EL) to carry out the valuation exercise again.

Required:
(a) State the matters that you would consider regarding:
(i) The competence, capabilities and objectivity of EL. (03
(ii) Evaluation of the adequacy of EL’s work. (03
)
)
(b) Briefly discuss the course of action in case you are not satisfied with the work
performed by EL. (03
)

Q.6 You are the audit manager on the audit of a listed company, Kamil Limited (KL). Prior to
completion of audit, you came across a prospectus issued by Neelum Limited (NL)
according to which a director of KL is the chief executive of NL. However, the name of NL
was not included in the list of related parties provided by KL. On being confronted the
management has advised that the name was omitted inadvertently as the appointment took
place just two months prior to the year end.

Required:
Discuss your course of action in the above situation. (07)
Audit and Assurance Page 3 of
3

Q.7 Discuss the categories of threats that may be involved in each of the following independent
situations and advise the partners of the concerned firm with regard to the possible course
of action that may be followed in each situation:

(a) Ahmed has recently joined a firm of Chartered Accountants. The firm intends to
depute him on the audit of Masoom (Private) Limited (MPL). Prior to joining the
firm, Ahmed had been providing accounting and taxation services to MPL for many
years, in the capacity of a consultant. (04)

(b) It has been discovered that father of one of the trainees posted on the audit of Chalak
Limited (CL), has a financial interest in CL.
(04)

(c) Hoshiyar Limited (HL), an audit client of your firm has recently advertised certain
vacancies in its accounts department. The said positions have been applied for by
number of individuals including two staff members who are posted on the audit of HL.
(04)

Q.8 You have been assigned to plan the test of controls in respect of receiving of goods and
invoices from suppliers of Bhurban Limited. In this regard, you are required to identify the
following:

(a) The related risks (03)


(b) Controls that you expect to see to address the above risks (04)
(c) Audit procedures that you need to perform to test the controls (03)

Q.9 While reviewing the audit files of four different clients you confronted the following
situations:

(i) Due to tough competition in the market, the company has been unable to increase the
prices of its products since last 5 years.
(ii) Addition to intangible assets, amounting to Rs. 500 million include research cost of
Rs. 10 million which is duly supported by invoices from suppliers.
(iii) During the last three years, the Chief Executive and higher management has been
earning handsome bonuses, based on the profitability of the company.
(iv) Physical stock take on 31 December 2014 included goods sold but not despatched
amounting to Rs. 52 million. The delivering of goods was stopped on the request of a
distributor. Upto 20 January 2015, the distributor has taken delivery of goods
amounting to Rs. 2 million.

Required:
(a) In each of the above situations, identify with justification whether it represents a risk
of fraud. (06)
(b) Describe what actions are to be taken by an auditor on identifying a fraud risk factor. (04)

Q.10 Controls over data transmission help to ensure that transmitted data is complete, secure and
unaltered.

Required:
State any five controls over data transmission which help to ensure that the data is secure
and unaltered. (04)

(THE END)

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