TOPIC 1
ASSURANCE AND NON-ASSURANCE ENGAGEMENTS
QUESTION 1
August 2024 Question One C
You are a senior auditor in the audit of Bayeti Ltd., a medium-sized company which sells a limited range of industrial products. While performing reviews on Bayeti Ltd.’s audit files, you have noted that a number of creditors have withdrawn their financial support to your client and that your client has defaulted on a number of loans. The working papers conclude that the going concern assumption is inappropriate and recommends that a note explaining the cash flow challenges your client is facing be included in the financial statements. However, the directors are reluctant to include the note in the financial statements.
Required:
In each case, discuss THREE implications on the audit report if:
(i) The directors refuse to disclose the note. (3 marks)
(ii) The directors agree to disclose the note. (3 marks)
QUESTION 2
August 2024 Question Five B
In the context of audit assurance engagements, describe how “attestation engagements” differ from “direct reporting engagements”. (4 marks)
QUESTION 3
December 2023 Question One A
You are the Audit Manager of Baraka and Company LLP, who are the auditors of Miradi Ltd. for the year ended 30 June 2023. The company has net assets of Sh.150 million. The audit has been completed but there is a matter that has not yet been resolved on depreciation of buildings. The directors of Miradi Ltd. have resolved that depreciation on buildings will not be provided for in the financial statements. The buildings were acquired in the year 2020 and no depreciation has been provided since.
Required:
(i) Describe SIX additional audit procedures and actions that you could take with respect to the above matter. (6 marks)
(ii) Assume that, according to your workings, the depreciation charge on the buildings for the year ended 30 June 2023 should be Sh.4,200,000 based on the straight line method of depreciation at an annual rate of 5%.
Required:
Discuss the implications of the above on the financial statements, clearly indicating its effect on the audit report. (8 marks)
QUESTION 4
August 2023 Question Two B
Discuss FIVE types of audit opinions, specifying the circumstances under which each opinion may be ideal. (10 marks)
QUESTION 5
August 2023 Question Three A (i) and (ii)
As an audit practitioner, you have been invited by your local accountancy institute to provide insights to aspiring accountants on audit engagements, review of financial statements and the distinction between these two engagements.
In the context of the above, prepare your explanatory notes on the following:
(i) Purpose of review engagements in relation to financial statements. (3 marks)
(ii) THREE features that distinguish review engagements from audit engagements in relation to financial statements. (6 marks)
QUESTION 6
April 2023 Question One A
As the partner in charge of the internal quality review and control envisaged by International Standard on Quality Management (ISQCM) 1, you are required to prepare a brief for training the engagement team in your firm.
Required:
In light of the above statement:
(i) Explain the difference between “assurance” and “non-assurance” services as provided by external auditors. (4 marks)
QUESTION 7
April 2022 Question Three B
Discuss the procedures and nature of reporting adopted by auditors when engaged in compilation engagements of the prospective clients. (8 marks)
QUESTION 8
April 2022 Question Five A
Describe the circumstances that could lead to each of the following audit opinions and the implications of each opinion:
(i) Adverse opinion. (2 marks)
(ii) Emphasis of matter. (2 marks)
(iii) Disclaimer of opinion. (2 marks)
(iv) ‘Except for’ opinion. (2 marks)
QUESTION 9
November 2018 Question Four B
Discuss the objective of a review engagement contrasting the level of assurance provided with that of an audit of financial statements. (4 marks)
QUESTION 10
May 2018 Question Two B
Contrast the scope of due diligence investigations with that of an audit of financial statements. (6 marks)
QUESTION 11
December 2017 Question Two A
The framework for assurance engagements does not permit an auditor to give an absolute level of assurance.
With reference to the above statement, suggest five reasons why it is not possible to give an absolute level of assurance. (10 marks)
QUESTION 12
September 2015 Question One A
Your audit firm has tendered for the audit of Hekima Group of Companies.
Required:
Evaluate six matters that should be considered before accepting the audit engagement in the event your firm is successful in the tender. (6 marks)
