KASNEB Advanced Auditing & Assurance - Question 1c

Explore the potential threats to an auditor's independence. ... [Click to view full question and step-by-step solution]

KASNEB Advanced Auditing & Assurance - Question 4c

Describe some of the areas that an audit review should address. ... [Click to view full question and step-by-step solution]

KASNEB Advanced Auditing & Assurance - Question 5a

Explain the main rules of evidence in court proceedings relating to audit issues. ... [Click to view full question and step-by-step solution]

December 2021

Q: KASNEB Advanced Auditing & Assurance - Question 2b

You are the Audit Manager at ABC &amp; Co., a firm of Certified Public Accountants. Currently, you are responsible for the audit of two companies, L Ltd. an... [Click to view full question and step-by-step solution]

1a

Audit evaluation and reviews Contemporary issues and emerging trends

One of the practices that has gained momentum in the recent past is remote auditing, particularly following the outbreak of the COVID-19 pandemic.

Required:

As an auditor, describe how you would approach remote auditing from a practical perspective.

1b

Audit evaluation and reviews Contemporary issues and emerging trends

Management audit calls for an inter-disciplinary approach considering the scope and focus of the audit.

Required:

Discuss the above statement with particular reference to:

(i) Steps involved in a management audit.

(ii) Management functions appraised. (iii) Audit techniques adopted.

1c

Professional and ethical considerations

Explore the potential threats to an auditor's independence.

2a

Professional and ethical considerations Management of audit practice

You are the Audit Manager at Milele Associates, a firm of Certified Public Accountants. You are assigning staff to the final audit of Melrose Ltd., a company listed on the Securities Exchange, for the year ended 30 September 2021. You are aware of the following critical matters:

Melrose Ltd. has recently issued a profit warning. The company has announced that significant synergies expected from the acquisition of Atalanta Ltd., a former competitor company, have not materialised. Moreover, it has emerged that some of Atalanta Ltd.'s assets are significantly impaired.
Your firm's Corporate Finance Department assisted by two audit trainees carried out due diligence on behalf of Melrose Ltd. before the purchase of Atalanta Ltd. was completed in September 2020.

Required:

Comment on the ethical and other professional issues raised by the above matter and their implications, if any, for staffing the final audit of Melrose Ltd. for the year ended 30 September 2021.

2b

Concluding and reporting Professional and ethical considerations

You are the Audit Manager at ABC & Co., a firm of Certified Public Accountants. Currently, you are responsible for the audit of two companies, L Ltd. and M Ltd. The year end for each of the companies is 30 June. You are currently reviewing the audit working papers, files and the audit seniors' recommendations for the auditors' reports. The details are as follows:

1

L Ltd. is a subsidiary of K Ltd. Serious going concern problems have been noted during this year's audit. L Ltd. will be unable to trade for the foreseeable future unless it continues to receive financial support from the parent company. L Ltd. has received a letter of support (comfort letter) from K Ltd.

The Audit Senior has suggested that due to the seriousness of the situation, the audit opinion must at least be qualified "except for".

2

M Ltd. has changed its accounting policy for goodwill during the year from amortisation over its estimated useful life to annual impairment testing. No disclosure of this change has been made in the financial statements. The carrying amount of goodwill in the statement of financial position as at 30 June 2021 is the same as at 30 June 2020 as management's impairment test shows that it is not impaired.

The Audit Senior has concluded that a qualification is not required but suggests that attention could be drawn to the change by way of an emphasis of matter paragraph.

Required:

Discuss, with justification, whether you would agree with the Audit Senior's conclusions in each of the cases above.

2c

Professional and ethical considerations

Explain the case against the rotation of auditors by a client. (Hint: Approach from both the auditor's and client's perspective).

3a

Audit framework and regulations Audit evaluation and reviews

An audit strategy sets the direction, timing and scope of an audit. Required: In the context of the statement above:

(i) Explore the salient features that distinguish a systems-based approach from a risk-based approach to an audit

(ii) Describe the factors that influence the choice of an audit strategy.

3b

Audit related assurance services Audit evaluation and reviews

There is a strong inter-connection between a financial audit and an operational audit. However, differences also exist.

Required:

Discuss the above statement, clearly bringing out any differences between the two types of audit.

3c

Professional and ethical considerations Audit evaluation and reviews

The International Standards on Auditing (ISAs) address various professional standards of practice for auditors. In particular, ISA 240 - "The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements" requires the auditor to focus on areas where there is risk of material misstatements due to fraud, including management fraud.

Required:

Explain the actions that an auditor should take to effectively deal with issues of fraud during an audit.

4a

Management of audit practice Audit evaluation and reviews Regulatory Environment

Audit committees play a critical role in the governance structure of institutions and in the protection of public interest. Required: Discuss the key responsibilities of an audit committee.

4b

Regulatory Environment Contemporary issues and emerging trends

Money laundering continues to gain currency in spite of efforts by countries and international financial institutions to combat it.

Required:

Summarise some of the measures undertaken by various countries and international financial institutions to control and prevent money laundering.

4c

Audit evaluation and reviews Management of audit practice

Describe some of the areas that an audit review should address.

5a

Professional and ethical considerations Regulatory Environment

Explain the main rules of evidence in court proceedings relating to audit issues.

5b

Audit related assurance services Assurance and non-assurance engagements Contemporary issues and emerging trends

Discuss each of the following matters as applied in auditing and assurance:

(i) Due diligence investigations.

(ii) Role of auditors in receiverships and liquidations.

(iii) Integrated reporting.

December 2021

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