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Assurance and non- assurance engagements

Unit: Audit & Assurance

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Practice CPA Audit & Assurance Assurance and non- assurance engagements questions with detailed answers and explanations.

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August 2026

 1 Questions
Question 1
​​Solar Cooperative Ltd. operates solar mini-grids in Turkana and Marsabit counties. The cooperative sells electricity to households through prepaid meters. It also receives part of its funding from the Green Energy Access Fund, a renewable energy grant programme established to support affordable electricity access in underserved communities. As a condition of the funding, Solar Cooperative Ltd. is required to report the number of connected households to the grant administrator. 

You are the audit manager at Baraka & Associates, Certified Public Accountants, and you are responsible for the audit of the annual financial statements of Solar Cooperative Ltd. In addition to the audit of the financial statements, the board of Solar Cooperative Ltd. has requested your audit firm to consider undertaking a separate assurance assignment on the accuracy of the household connection numbers reported to the Green Energy Access Fund. 

During client acceptance discussions, the marketing partner in Baraka & Associates proposed an advertisement stating that the firm is “the only audit firm approved for renewable energy audits in Kenya”. The partner also suggested charging a success fee based on the amount of grant funding released to Solar Cooperative Ltd. 

Required: 
(a) (i) Identify areas of risk of material misstatement that Baraka & Associates should consider when planning the audit of Solar Cooperative Ltd.’s annual financial statements. 

    (ii) Explain audit procedures that could be performed to verify revenue generated from the prepaid electricity meters.

(b) (i) Explain matters that Baraka & Associates should consider when determining whether the grant has been properly recognised and disclosed in the financial statements. 

    (ii) Describe procedures that Baraka & Associates could perform during a separate assurance engagement on the accuracy of the reported household connection numbers. 

(c) Discuss ethical and professional issues arising from the proposed advertisement and the success fee arrangement and recommend how Baraka & Associates should respond to each issue.


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April 2026

 1 Questions
Question 5
​​(a) Explain TWO purposes of analytical procedures when performed at the final review stage of the audit. 
 
(b) Discuss FOUR objectives of a performance audit in the public sector context.    
 
(c) Analyse FOUR differences between a “review engagement” and an “audit”. 


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December 2025

 1 Questions
Question 4a
​​The directors of Karibu Ltd. have prepared a cash flow forecast for submission to Fedha Bank. They have requeted you as their auditor, to provide a negative assurance report to this cash flow forecast.  
 
Required: 
(i) Distinguish between “positive assurance” and “negative assurance”. 
 
(ii) Evaluate TWO advantages the directors of Karibu Ltd. could derive from the negative ssurance on their cash flow forecast.  


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August 2025

 1 Questions
Question 1b
​​An organisation that you have been auditing has approached your audit firm to review its interim financial information before it releases to the public on quarterly basis as required by the regulations governing its operations. 

Required: 
In reference to International Standards on Review Engagements (ISRE) 2410, describe THREE general principles that your firm would have to apply in performing the review engagement.


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April 2025

 1 Questions
Question 3c
​​Discuss THREE differences between a “review engagement” and an “external audit”.


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December 2024

 2 Questions
Question 4b
​​Job Juma has recently been declared redundant. He is considering setting up a care home for the elderly, as he is aware of an increasing need for this service with the ageing population. He has identified a large house, which he plans to convert into the care home. Each resident will have a bedroom, there will be a common sitting room and all meals will be provided in a dining room. No long-term nursing care will be provided. The large house is in a poor state of repair and will require considerable structural alterations and repairs to make it suitable for use as a care home for the elderly. This includes purchase of new furniture and fittings, decoration of the whole house and specialised equipment to allow mobility of the clients. 

 Job Juma and his wife propose to work full time in the business, which he expects to be running six months after the purchase of the house. Job Juma has already obtained some estimates of the conversion costs and information on the income and expected running costs of the care home. 

 Job Juma has received about Sh.10,500,000 from his redundancy and expects to receive about Sh.17,000,000 from the sale of his house. The owners of the house he proposes to buy are asking for Sh.12,000,000 for it, and Job expects to spend Sh.7,500,000 on conversion. Conversion includes: building work, furnishing, decorations and equipment. Job would like to obtain additional finance from the bank to undertake this project. He has prepared a draft capital expenditure forecast, profit forecast and cash flow forecast which he has asked you to check before he submits them to the bank. 

 Required: 

 Advise Job Juma on SIX elements that the bank credit department would verify in the: 

(i) Capital expenditure forecast 

(ii) Profit forecast


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Question 1a
​​In deciding on whether to accept a new audit client or not, the auditor must consider a number of factors. International Standard on Auditing (ISA) 210 “Agreeing on the Terms of Engagement”, further requires that, before commencement of the audit, the auditor should carry out procedures to ensure that the pre-conditions of an audit are present. 

 Required: 

 (i) Highlight SIX matters to be considered by an auditor before accepting a new audit engagement. 

(ii) Describe the THREE preconditions of an audit that an auditor must ensure are present before accepting an audit assignment.


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August 2024

 2 Questions
Question 1d
​​Enumerate SIX contents of an audit engagement letter.


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Question 1c
​​Distinguish between “reasonable assurance engagements” and “limited assurance engagements”.


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April 2024

 1 Questions
Question 1b
​​Enumerate FIVE elements of an assurance engagement


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April 2023

 1 Questions
Question 3c
​​International Standard of Auditing (ISA) 315 - Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment, requires the auditor to perform risk assessment procedures which include obtaining an understanding of the entity and its environment, including its internal controls.

Required:
(i) Citing a relevant example, explain the term “negative assurance”.
(ii) Explain the purpose of undertaking risk assessment procedures.
(iii) Outline sources of audit evidence that the auditor can use as part of risk assessment procedures.


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August 2022

 1 Questions
Question 2b
​​Auditors are frequently required to provide assurance for a broad range of non-audit engagements.

Required:

(i) Summarise four elements of an assurance engagement.

(ii) Distinguish between “reasonable assurance engagements” and “limited assurance engagements”. 


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April 2022

 1 Questions
Question 5b
​​You are the managing partner in Odhiambo and Associates (Certified Public Accountants). Wasali Ltd. has recently engaged your firm to provide tax consultation services to the company.

Required:
Using four elements of an assurance engagement, explain whether the above engagement qualifies to be an assurance engagement.


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Pilot December 2021

 2 Questions
Question 4c
​​In relation to ISA 3000 “Assurance Engagements Other than Audits or Reviews of Historical Financial Information”: 

 State the difference between: 

 (i) An audit and an assurance engagement.

(ii) An attestation engagement and a direct engagement.


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Question 4d
​​Describe five elements of assurance engagement.


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September 2021

 1 Questions
Question 2a
​​Distinguish between "reasonable assurance engagement" and "limited assurance engagement".


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November 2019

 1 Questions
Question 2b
​​You work as an audit senior for Kamau Mengo and Associates. You have been appointed to be the lead auditor of Tamu Tamu Ltd. for the financial year ended 31 October 2019. Tamu Tamu Ltd. specialises in the production of biscuits and cakes. 

During preliminary audit work, you noted that the profitability of the company declined, costs increased and prices charged were higher than those of competitors. This was due to low levels of output. In recent years, Tamu Tamu Ltd. has been financing its operations using a bank overdraft facility. This issue was raised during a meeting between the auditors and Tamu Tamu Ltd.'s management. 

During this meeting, a discussion took place which focused on actions that could be taken by the management to improve the liquidity of the company. The management team informed you of a plan to expand facilities for producing biscuits, as this line of production had maintained its market share. Tamu Tamu Ltd. has applied for a bank loan to finance this expansion and also maintain the present level of working capital. 

To support its request for a loan, the company has prepared a cash flow forecast for the two years from the end of the reporting period. The internal audit department has submitted a report on this forecast to the board of directors. However, the bank has said it would like a report from the external auditors, to confirm the reasonableness of the forecast. 

Following this request, the company has requested you to examine the cash flow forecast and write a report to the bank. 

Required: 
(i) Describe three levels of assurance that could be included in your response to the bank's request. 

(ii) Assess eight procedures that could be adopted to examine the cash flow forecast.


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May 2019

 1 Questions
Question 2b
​​The Finance Director of Kijanj Industries has requested your firm to undertake a non-audit assurance engagement later in the year. Part of your team includes an audit assistant who has not been involved in such an assignment before and has asked you to explain what an assurance engagement involves. 

Required: 
Explain three key elements of an assurance engagement.


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November 2018

 2 Questions
Question 4b
​​The finance director of your client, ABC Ltd., has read about review engagements and is interested in the possibility of ABC undertaking these in future. However, he is unsure how these engagements differ from an external audit and how much assurance would be gained from these types of engagement. 

Required: 
(i) Explain the purpose of review engagements and how they differ from external audits. 

(ii) Describe the level of assurance provided by external audits and review engagements.


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Question 1c
​​ Explain the term "negative assurance" as used in auditing.


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May 2018

 3 Questions
Question 5a
​​A suitable criteria is the benchmark used to evaluate a subject matter for the purpose of presentation and disclosure.

Required:

Describe three characteristics of a suitable criteria.


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Question 4c
​​Distinguish between "assurance engagements" and "non-assurance engagements".


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Question 1b
​​International Standard on Review Engagements (ISRE) 2400 "Engagements to review Financial Statements" sets out the objective, general principles and procedures to be applied for a review engagement. 

Required: 
Explain six main procedures which an auditor should perform when conducting a review engagement.


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November 2017

 2 Questions
Question 1b
​​Describe three circumstances in which the management of an organisation might request the auditor to change the terms of an audit engagement.


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Question 1a
​ ​ Auditors carry out various audit assignments. 

In relation to the above statement, explain four non-assurance assignments that auditors undertake.


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May 2017

 1 Questions
Question 4b
​​In the context of auditing, define the following:

(i) Operationalaudit.

(ii) Financial audit.

(iii) Agreed upon procedures engagement.

(iv) Positive assurance. 


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November 2016

 1 Questions
Question 5a
​ ​​ Describe four types of assurance engagements.


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May 2016

 1 Questions
Question 2b
​​Describe the type of assurance report a practitioner would issue in each ofthe foliowing engagements:

(i) Reasonable assurance engagement.

(ii) Limited assurance engagement.


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Pilot September 2015

 1 Questions
Question 4a
​​ XYZ Ltd.'s directors have expressed an interest in your audit firm Tato & Co. to perform other review engagements in addition to the external audit. However, they are unsure how much assurance would be gained via these engagements and how these differ compared to the assurance provided by an external audit. 

Required: 
Identify and explain the level of assurance provided by an external audit and other review engagements.


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