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Nature and purpose of an audit

Unit: Audit & Assurance

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Practice CPA Audit & Assurance Nature and purpose of an audit questions with detailed answers and explanations.

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December 2025

 1 Questions
Question 1a
​​Continuous auditing signifies an important shift in how audits are conducted. This approach aims to transform audits from periodic, manual reviews into fast, agile operations that can keep pace with modern demands. 

Required: 
(i) Discuss THREE benefits that might arise from the conduct of continuous audits as opposed to traditional audits. 

(ii) Explain TWO challenges of continuous auditing.


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April 2025

 2 Questions
Question 1a
​​Highlight SIX inherent limitations of an audit of historical financial statements.


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Question 5a
​​There are circumstances where auditors may be held responsible for failure to detect errors and frauds depending on certain factors. 

 Explain FIVE factors that determine whether the auditor is responsible for non-detection of errors and frauds


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August 2024

 1 Questions
Question 1a
​​Highlight FIVE inherent limitations of an audit.


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April 2024

 1 Questions
Question 1a
​​Private companies are not required by law to have their financial statements examined by an auditor. However, all public entities are required by law to have their financial statements audited. 

 Required: 

 Explain SIX reasons why an audit is considered necessary for limited liability companies and other public entities.


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April 2023

 1 Questions
Question 1a
​​Highlight THREE benefits that may be derived from independently audited financial statements.


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December 2022

 1 Questions
Question 1a
​​Distinguish between a “financial statement audit” and a “fraud examination”.


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April 2022

 1 Questions
Question 1a
​ ​​Your firm has been engaged in auditing small entities for the last five years. In a recent development, your firm has been appointed to conduct an audit on a large entity, which is the first assignment of such magnitude. You are required to undertake an interim audit and a final audit of the large entity.

Required:
(i) Explain the objective of an external audit.

(ii) Highlight five audit procedures you could undertake during the interim audit of the large entity.

(iii) Describe five audit procedures you would undertake during the final audit of the large entity.

(iv) Present two drawbacks of conducting an interim audit


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September 2021

 1 Questions
Question 1c
​Highlight two features of a non-statutory audit.


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May 2021

 1 Questions
Question 4c
​​In some organisations, the internal audit function is involved in the provision of a broad range of services that can either be classified as assurance services or consulting services.

Required:
Discuss four distinguishing features between assurance services and consulting services provided by the internal audit function in an organisation.


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November 2020

 1 Questions
Question 4a
​​Your friend James Nyakemincha has recently purchased some shares from ABC Ltd., a listed company at the Securities Exchange. You questioned him on whether he had investigated the company before purchasing the shares. He replied: "Not really, I chose ABC Ltd.'s shares because I read in the newspaper that ABC is externally audited, of which not all companies are, and that their auditors are an international auditing firm hence it must be a good investment". 

Required: 

Citing five reasons, justify why you would agree or disagree with James' view with regard to his purchase of shares.


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May 2019

 1 Questions
Question 5b
​​(i) Explain the term "reasonable assurance" as used in auditing.

(ii) The internal audit function of an entity should have an internal audit charter approved by the Board to govern its activities:

Required:

As an internal auditor of Zed Ltd., discuss six matters contained in an internal audit charter of an entity. 


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November 2017

 1 Questions
Question 5b
​​Explain the following terms:

(i) Reasonable assurance.

(ii) Opinion shopping. 


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May 2017

 1 Questions
Question 2b
​ ​​ Discuss four capabilities and competencies expected of the engagement team as espoused in the International Standards of Auditing (ISA) 220 "Quality Control for Audit of Financial Statements".


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May 2016

 1 Questions
Question 2a
​​Highlight two limitations of external audits.


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