ASSURANCE AND AUDIT PRACTICE NOV 2007 QUESTION 1 (a) Your firm, Sika Asem & Co is planning the

audit of a client, Borbor Company Ltd for the year ended !st "ecember #$$%& 'he company has a turno(er of )*+!$ million ,-. of /hich /as under/ritten on credit& 'he year end debtors is about )*+# million and there are about !$$$ customers on the sales ledger&

You ha(e been asked by the partner in charge of the audit to consider /here it /ould be appropriate to use0 (i) statistics, or (ii) 1udgment in the (alidation of the sales transaction system and the (erification of the year2end debtors& Required: "escribe and illustrate, by the use of suitable e3amples, the /ays in /hich statistics and 1udgment can be used in relation to the0 (i) (alidation of the sales transaction system (ii) (erification of the year2end debtors (10 marks) (b) 'he follo/ing is the fi3ed assets schedule in the notes to the financial statements of 4ketsenketse Ltd, a client company firm you are auditing& 5678" ASS8'S SC*8"9L8
:;';< =8*6CL8 C;:>9'8<S

)*+ Cost: Balance as at !st ?anuary Additions during the year "isposals in year Balance as at !st "ecember Depreciation: Balance as at !st ?anuary "isposals in year Charge for the year Balance as at !st "ecember 4et Book =alue, !st "ecember 4et Book =alue, !st ?anuary !,@$$ %$$ 2 #,$$$ -%$ 2 @$$ A%$ !,$@$ ,@$

)*+ ,$$ @$$ ( $$) A$$ %$$ (##-) ##%$$ $$ #$$

"epreciation has been pro(ided for as follo/s0 :otor =ehicles Computers both on straight line& Required: ;utline the procedures you /ould use to (erify the 5i3ed Assets in the Balance Sheet of the company& (10 marks) (Tota : 20 !ar"s# 2 2 #$. per annum #-. per annum,

QUESTION 2 Your firm 5ortune, Lucky, >ro(idence & Co ha(e been e3periencing d/indling fortunes in recent years& 'he partners ha(e been brainstorming on ho/ the firm can /in more clients in order to increase earnings& ?ust around the time /hen the partners /ere /orrying about getting ne/ clients, the Commissioner of the 6nternational <e(enue Ser(ice /rote to the firm to carry out a ta3 in(estigation into the operations of an e3patriate in the motor industry& At the same time a prospecti(e client in the timber industry has /ritten to the firm to tender for audit /ork& Required: (a) Briefly distinguish bet/een ad(ertising and publicity as means of obtaining professional /ork& ( marks) "escribe the factors you /ill consider /hen tendering for audit /ork& (7 marks) ;utline the procedures you /ill follo/ to carry out the ta3 in(estigation on behalf of the Commissioner of the 6nternal <e(enue Ser(ice& (10 marks) (Tota : 20 !ar"s#

(b) (c)

QUESTION $

(a)

Your firm has been appointed auditors of Sankofa Co Ltd in succession to another firm of Chartered Accountants& 'he first financial statements on /hich you are reBuested to e3press an opinion are for the year ended !st "ecember, #$$%&

Required: (i) (ii) "etail out your responsibilities in respect of prior period financial information, including comparati(es& "etail out the procedures you /ould adopt in order to discharge your responsibilities (10 marks) You are about to commence the audit re(ie/ of the financial statements of Cool 'imes Limited, a trading company /ith foreign outlets, for the year ended ! st ?anuary #$$C, for proper presentation and compliance /ith statute and standard practice&

(b)

Required: "escribe any fi(e principal accounting policies that you /ould e3pect to see in the notes to the financial statements& (5 marks) (c) :ake a (i(id distinction bet/een D(erificationE and Din(estigationE to the director of a client company& (5 marks) (Tota : 20 !ar"s#

QUESTION % (a) 'he chairman of the Audit Committee of Board of "irectors of Ayeayeefeh Company Limited :r& Abessey Bee asked you as the Audit :anager in charge of Ayeayeefeh audit to e3plain the term Finherent uncertaintiesG in Bualification of audit report /hich he claims he is concerned /ith as the Senior >artner mentioned /hen discussing the accounts /ith him&

Required: (i) State the circumstances under /hich an auditor can Bualify his opinion and the le(els of Bualified opinion& 6ndicate this also in a table form& (6 marks) "escribe three rele(ant issues /hich must be seriously considered under inherent uncertainties& (4 marks)

(ii)

(b)

'he Chief 83ecuti(e of La Sea 5oods Limited has intimated to you that the company is contracting a credit facility of )*+!$$,$$$ to support its operations& 'he )eneral :anager, 5inance of the company has prepared a business plan reBuested by the companyGs bankers for the loan facility& 'he plan includes detailGs of the companyGs products, *uman resources, :arketing, financial (sales, customers, suppliers etc) information among others& 'he financial information includes profit, cash flo/ and balance sheet forecasts for the year ending !st "ecember, #$$, /ith details of assumptions on /hich the forecasts are based and accounting policies applied in compiling the profit forecast& 'he Board of "irectors and Senior :anagement ha(e consulted your firm ;nuapa and Co, Chartered Accountants to re(ie/ and report on the financial statement prior to submission to this companyGs bank /hich has strict credit policies&

Required: State and e&p ain matters you /ould consider and any procedures you /ould perform in re(ie/ing the profit and cash forecasts& (10 marks) (Tota : 20 !ar"s#

QUESTION ' You are the audit manager of H/eku Ananse and Co Chartered Accountants& You are planning for the audit of 4tikuma Company Limited /hich has been a client of your firm for a number of years& 6n past years problems ha(e been encountered in controlling audit time and cost as /ell as differences of opinion /hen it comes to re(ie/ing the financial statements to form the audit opinion& Required: (a) 8numerate and e3plain the strategies you /ill follo/ to control and monitor audit time and cost during the forthcoming audit of 4tikuma Company Limited& (10 marks) Ihat factors /ill you consider /hen re(ie/ing the financial statements for proper presentation and compliance /ith accounting principles and statementsJ (10 marks) (Tota : 20 !ar"s# @

(b)