Short Answer (45
marks)
1)
In
the completion stage of an audit engagement there are many tasks to
complete. Examples of these tasks
include review for commitments and working paper review.
Required:
Identify five additional tasks the auditor
needs to be concerned about and address as part of the completion stage of the
audit. Be specific as to what the
auditor will do in each of these areas (give specific audit procedures or steps
the auditor would take to complete the task).
Identify what problems could occur if the task noted was missed by the
auditor. (15 marks)
2)
The
following are unrelated situations. For each
of these independent situations, identify what type of audit opinion you would
recommend, and explain why. (6 marks)
a.
Country
Supply Ltd. has fully expensed the purchase of its new computers, rather than
capitalizing and amortizing them, arguing that the technology changes so
quickly that computers have no resale value as soon as they are purchased. The auditors believe that the computer system
should have been amortized over four years, and that the impact on the current
year’s financial statements is material.
b.
The
CEO of Woodbridge Industries Ltd. has asked the auditor not to send
confirmations to customers as a means of verifying the accounts receivable
balances at the end of the current year.
Problems have been experienced during the last three months of the year,
due to the installation of a new software system. Customers have already complained about the
frequency with which Woodbridge has had to contact them with corrected
information. The audit team has examined
customer payments after year end, and are satisfied that the accounts
receivable amounts recorded at year end are not materially misstated.
c.
Sammy
Ltd. received an unqualified audit report last year, but when the audit team
arrived to carry out the current year’s audit, they discovered that many
significant changes had occurred. When
his son was unable to find work upon graduating from high school, the owner
took advantage of the vacancy created by the retirement of the firm’s
accountant, and hired his son as the accountant.
Since then, the accounting clerk quit and has
not been replaced. A scan of the general
ledger account balances quickly revealed two new accounts that have a high
volume of transactions. Miscellaneous
account one has a material debit balance and miscellaneous account two has a
material credit balance, but the bank account does balance. The audit team has discovered that there is
an inadequate document trail to properly analyze the nature of the transactions
being posted through the two miscellaneous accounts, and the auditors are
therefore uncertain which accounts should be adjusted.
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