AUDITING AND ASSURANCE June 2011

QUESTION ONE

Briefly explain the meaning of the term ―audit‖ (2 marks)

What are the objectives of an audit according to the Companies Act? (3 marks)

List four advantages to a company of having its accounts audited (4 marks)
Identify and list the responsibilities of company directors in relation to the company‘s

accounting system. (6 marks)

List five limitations of an audit (5 marks)

(Total: 20 marks)

QUESTION ONE

You are required to explain the meaning of the term „audit‟

The explanatory foreword to the International Standards on Auditing (ISA) describes audit as the independent examination of and expression of an opinion on the financial statements of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory obligation.

Objectives of an audit

The primary objective of an audit of financial statements is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework and show a true and fair view. (Financial reporting framework refers to the international financial reporting standards, provisions of the companies Act and other relevant statutes and legislation). The auditor expresses an opinion as to whether the financial statements give a true and fair view of the financial position and

performance of the company and cash flows.

Note that: an auditor does not certify the financial statements as true and fair butonly reports his opinion basing on the evidence obtained.

Advantages to a company of having its accounts audited

An audit has many benefits to the organisation or business entity.

An audit protects the interests of the shareholders who are separated from the management of the company. This is especially the case for minority shareholders who have little say in the management of their company.

An audit being an independent examination of the financial statements gives

reliance on them.credibility to the financial statements. The various users can therefore place

The auditors experience will enable him to make recommendations on ways of improving the accounting and the internal control system.

An audit assists in the prevention and dete ction of errors and frauds through the moral and deterrent effect of an audit.

Directors have the following responsibilities in relation to the company‟s accounting system

Responsibility to put in place a system that will ensure proper accounting records are maintained. The Companies Act requires management to keep proper books of accounts, this is only possible with a proper accounting

systems;

They are responsible for ensuring that app ropriate controls are put in place within the

operation of the accounting system;

Responsibility to continuously review the operation of the controls to ensure that they

are adequate for the operations of the company;

To ensure that the accounting system and the internal control system safeguards the company‘s assets.

Limitations of an audit

_{the year;}It is not possible to detect all the frauds and errors that might have taken place during

Management might fail disclose to the auditor some of the information that is needed;

An audit is carried out on a test basis. It might not therefore be possible to examine all the transactions. The sam ples selected might not be representative

of the population;

Time limit placed on the auditor‘s work. This could limit the amount of work to be performed.

QUESTION TWO

The internal control system encompasses all the policies and procedures adopted by the management of an entity to assist it in achieving management objectives.

Required:

Identify and explain five management objectives that an internal control system over

sales aims to achieve (10 marks)

List and briefly explain five control objectives that an internal control system over sales

aims to achieve (5 marks)

Explain are the inherent limitations of an internal control system (5 marks)

(Total: 20 marks)

QUESTION TWO

You are required to explain management objectives that an internal control

system (ICS) can help management achieve.

An ICS enables management to carry out the business in an orderly and efficient manner. Internal controls lay out the various procedures to be followed in conducting the affairs of the organisation. E.g. there will be procedures laying out the procedures to be followed in procuring raw materials to ensure that only necessary materials are procured which meet the quality standards of the company;

n An ICS ensures that the various policies that have been put in place are

employees in running the operations of the company; adhered to by

An ICS helps in safeguard the company‘s assets. Some controls are designed specifically to ensure the assets of the company are protected from theft, destruction and that they are used in the best interest of the company. This can either be directly through physical locking up or indirectly through recording. It

includes assessing assets and ensuring that any access is authorised.

ICS help in ensuring completeness and accuracy of the records maintained. The company‘s Act requires that the management of a company keep proper books of

These records are the basis for the preparation of the financial statements.

Strong internal controls help in preventing and detecting errors and frauds. The responsibility for the prevention and detection of fraud and error rests with management. This is achieved through the implementation and continuous operation of an adequate system of internal controls. Such a system reduces but does not eliminate the possibility of fraud and error.

You are required to discuss five control objectives that an internal control system over sales aims to achieve.

To ensure that the company only sells to credit worthy customers. This is aimed at reducing the risk of losses; selling to un credit worthy customers resulting in bad debt

To ensure that all sales made to customers are subsequently billed and recorded in the

ledger;

To ensure that all sales made are recorded in the correct financial period;

ⁿ To ensure that sales are billed at the approved selling prices;

To follow up on payments from customers and ensure that customers are adhering to the

approved terms of credit;

To ensure that there is proper control and authorisation of bad debts write offs.

Inherent limitations of an internal control system

The question that always arises in regard to the internal control system is whether such a system could be deemed to be 100% effective.

No internal control system, however elaborate, can by itself guarantee efficient

administration and completeness and accuracy of the records nor can it be proof

against fraudulent collusion, especially on the part of those holding positions of authority and trust. This implies that there are certain factors that could undermine the effective operation of an internal control system, some of which could be outside the

control of management. This is mainly due to the following inherent limitations of an internal control system:

Management has to ensure that the benefits expected from an internal control system outweigh the costs. As a result certain important controls might not be put in place due to the costs involved. E.g. a small entity might not have the resources to employ sufficient staff to ensure proper segregation of duties.

Most internal controls tend to be directed towards routine transactions rather than non-routine transactions. This leaves gaps that can be exploited because the non-routine transactions will not be subjected to appropriate controls.

Human error due to carelessness, distraction, mistakes of judgment and

control system.misunderstanding instructions could u ndermine the effectives of the internal

A member of management or an employee could circumvent controls through collusion with persons outside or inside the entity. E.g. where duties are segregated the employees could collude to perpetrate and conceal a fraud. Such collusion will render the segregation of duties ineffective.

Abuse of responsibility e.g. a member of management overriding an internal control

n The possibility that procedures maybe inadequate due to changes in conditions.

QUESTION THREE

Distinguish between a procedural audit and a balance sheet audit. (8 marks)
Explain the nature and purpose of a post-audit review (4 marks)
Identify the audit procedures which would need to be carried out in order to identify material post – balance sheet events. (8 marks⁾

(Total: 20 marks)

QUESTION THREE

You are required to distinguish between procedural and a balance sheet audit
- Procedural audits entail a review of the company‘s procedures and records so as to ascertain whether they are accurate and reliable for decision making. These audits are ideal for organizations operating in dynamic business environments and companies whose operations are so technical and need to be updated over time. The audit concentrates on the review of operating

procedures rather than on financial balances.

Balance sheet audits

These are audits in which the auditor starts his audit work from the balance sheet and tries to trace original entries to their final recording in a bid to prove their authencity. The auditor concentrates on proving the management

assertions that are relevant to each of the balance sheet items.

This audit approach is adopted when carrying out a special assignment where the auditor is required to concentrate on the verification of the assets and the liabilities.

Very little time is spent in testing controls that management has put in place.

You are required to explain the nature and purpose of a post audit review

A post audit review relates to the review of the audit work at the end of the audit before the audit report is signed. The review is usually carried out by the reporting partner to ensure that the objectives of the audit have been met and the conclusion reached are supported by sufficient appropriate audit evidence. Before the reporting partner review the audit work is first reviewed by the engagement manager.

You are required to identify the audit procedures which would need to be carried out in order to identify material post balance sheet events

Post Balance sheet events also referred to, as subsequent events are those events both favourable and unfavourable that occurs between the balance sheet date and the date when the financial statements are authorized for issue.

The audit procedures that the auditor would carry out in regard to post balance sheet events include the following:

Reviewing procedures management has established to ensure that subsequent events are identified and inquiring whether any such events have occurred

which might affect the financial statements being reported on;

Reading minutes of the meetings of the board of directors and audit committees held after the end of the financial period. By reading such minutes the auditor is able to identify any material subsequent events that might have occurred since

this would ordinarily be discussed at these meetings;

Review the entity‘s latest available interim financial statements and other reports such as budgets, cash flow forecasts. By reading such interim financial

statements the auditor is able to identify any subsequent events;

Inquiring from the entity‘s lawyers on litigation and legal claims against the company. This will provide further details on any developments on such

;

Inquiring from management whether any subsequent events have occurred which might affect the financial statements

QUESTION FOUR

You have completed your audit of Tinga Tinga Ltd. You have issued a management letter to the Chief Accountant which identifies weaknesses in the controls over sales. Cash is received over the counter, from salesmen and also through the post. Tinga Tinga Ltd‘s Chief Accountant has asked you for recommendations as to the type of controls you would wish to see in operation in a sales system.

Required: Outline the controls you would expect to find in Tinga Tinga Ltd‘s sales system with regardto:

Cash receipts by post (5 marks)
Cash collected by salesman (5 marks)
Cash sales within Tinga Tinga Ltd‘s premises (5 marks)
Banking of cash received (5 marks)

(Total: 20 marks)

QUESTION FOUR

Cash receipts by post

nThe mail should be opened by at least two persons;
The persons involved in the mail opening should be responsible trust worthy people;
A listing of all cash received should be prepared and the cheques crossed ‗payee only‘;

The cash received should be safely kept in a safe and should be banked intact on a daily basis;

A daily cash received report should be prepared and reviewed by a senior official.

Cash collected by sales men

A daily cash collected report should be prepared by each sales man showing the total cash

received from each customer;

The cash collection report should also show the expected cash collection basing on the

stock sold and the actual amount. Any variances should be explained;

The marketing manager should also review the cash reports on a daily basis to ensure that all

the stock issued for sale has been accounted for;

All the cash and cheques collected should be surrendered to the cashier on a daily basis. This should be kept in a safe and banked regularly;

n Debtors‘ statements should be sent to the customers on a monthly basis.

Cash sales within the premises

An appropriate method of recording all the cash sales should be put in place. For example, the company cash install cash registers or use of cash receipts to record all the cash sales;

Past Papers

The company should employ trust worthy cashiers who should under go proper training in

their duties;

On a daily basis the physical cash should be reconciled to the expected cash as per the cash register report. Any variances should be investigated and resolved;
n Cash collected should be kept in a safe and banked intact preferably on a daily basis;

There should be adequate physical security measures such as the use of closed circuit TV cameras (CCTV) and engaging security guards.

Banking of cash received

nCash received should be kept in a safe awaiting banking;

It might be necessary to engage a security company when transporting the cash to the bank;
n Banking should be done by a person independent of the cashiering function;
ⁿ The banking hours should be rotated to reduce the security risk;

Cash deposit slips should be prepared for all the cash banked and the amounts recorded in the cashbook.

QUESTION FIVE

Audit working papers should always be sufficiently complete and detailed to enable an auditor with no previous connection with the audit to subsequently ascertain from them what work was performed and to support the conclusions reached by the auditor

Required;

List four benefits that the auditor would obtain from working papers that meet the

above requirements (4 marks)

For each of the situations listed below, one form of audit evidence which is relevant and explain in each case whether that form of evidence is reliable and sufficient:-

i) A trade debtor shown in the balance sheet	(4 marks)
ii)A batch of work-in-progress on the shop floor at the year end	(4 marks)
iii)A contingent liability disclosed in the notes to the accounts	(4 marks)

Briefly explain giving two examples, the quality of audit evidence generated by third parties (4 marks)

(Total: 20 marks)

QUESTION FIVE

Working papers refers to the documentation prepared or obtained by the auditor and retained by him in connection with the performance of his audit. Audit working papers should always be sufficiently complete and detailed to enable an experienced auditor having no previous connection with the audit to ascertain the work that was performed supports the conclusions reached. The auditor should record all relevant information known to him at the time, the conclusions reached based on that information and the views of management.

Why the need for preparing good working papers.

The reporting partner needs to satisfy himself that work delegated by him has been properly performed. This is only possible by reviewing detailed working papers prepared by the audit staff that performed the work. This also aids in supervision and review of work done by audit assistants.

Working papers provide details of problems encountered together with evidence of work performed and conclusions drawn there from in arriving at the conclusions reached. These details can also serve as a good reference point for future audits.

Preparation of working papers encourages the auditor to adopt a methodical approach to his

work.

Working papers assist in the planning and performance of audits in future financial periods. ⁿ If sued for negligence working papers act as evidence of work done.

They are used for training of audit staff. Working papers contain audit programs and specimen schedules, which audit assistants, can refer to when conducting an audit.

You are required to identify one form of audit evidence that is relevant and explain in each case whether that form of evidence is reliable and sufficient

A trade debtor shown in the balance sheet

One form of audit evidence would be to obtain a direct confirmation from the debtor. This evidence is reliable because it is obtained from an independent third party and it is in writing. Such evidence is relevant in confirming the existence and also provide persuasive evidence as to ownership rights of the amount owing by the debtor. However, because of human nature, confirmations may not provide such persuasive evidence of accuracy where the entity‘s balance is in error in the other party‘s favour, e.g. an understatement of debtors.

Revision Questions and Answers

The evidence is however not sufficient because additional information will be required to for example confirm the valuation of the balance.

A batch of work in progress

One form of audit evidence would be to observe the stock take exercise as at the end of the financial period to ensure that the WIP is accurately computed and that the results can be relied upon. In addition it would be important to confirm there are appropriate procedures to identify the stage of completion of the WIP.

This evidence is relevant in confirming the existence of the stock and also in identifying the stage of completion in determining the valuation.

The evidence obtained through observation of the process is reliable because it is evidence obtained by the auditor. However, it is not sufficient because additional information will be required to test other assertions such as the valuation of WIP. The auditor would for example need to obtain need to confirm that all costs attributable to the WIP have been taken into account in the valuation.

A contingent liability disclosed in the notes to the accounts

One form of audit evidence would be obtain a letter of representation from management on the nature of the issue bringing rise to the contingent liability and also the factors that were considered in determining the accounting treatment of the contingency. This evidence would be relevant in confirming whether the contingency has been appropriately treated in the financial statements and whether there might be need to create a provision.

Depending on the nature of the contingency it might be necessary to obtain additional information. For example if the contingent liability arises out of a legal case against the company it might be necessary to obtain an independent confirmation from the company‘s lawyers on the possible outcome of the case and a quantification of the expected liability.

You are required to discuss the quality of audit evidence generated by third parties

Quality of audit evidence refers to the reliability and relevance of the evidence.

The reliability of evidence refers to the credibility of the source of the information i.e. the question of how much trust can the auditor place on the evidence while relevance refers to

the usefulness of the evidence in testing the management‘s assertions or the audit objective.

Evidence generated by third parties mainly includes direct confirmations of balances obtained from such parties and documentary evidence such as statements and invoices sent by such parties. The reliability of evidence obtained from such parties mainly depends on the following:

The evidence is usually in writing. Documentary evidence is more reliable than oral evidence;

The evidence is usually from an independent source. This increases its reliability. However, the auditor must be cautious to ensure that the third party is independent of the client and there is no possibility of collusion.

Examples of third party evidence include:

Direct confirmations such as replies to debtors circularization or banker‘s certificates and n Statements received from suppliers‘ on balances outstanding

QUESTION SIX

State the evidence which you, as the auditor, would like to find in place and pay attention to when vouching the following payments made by RR Paper Mills Ltd. during the financial year ended 31 October 2002.

Loans to three employees totalling 6 million (4 marks)
The last call on 5,000 ordinary shares at Sh.15 per share (4 marks)
Fire insurance premiums amounting to Sh.10,000 paid for the office block (4 marks)
A loan amounting to Sh.30 million obtained from a local bank and secured by the factory building (4 marks)
Salesmen‘s commissions amounting to Sh.3,000,000 (4 marks)

(Total: 20 marks)

QUESTION SIX

You are required to differentiate between compliance testing and substantive testing

Compliance tests also known as tests of controls are procedures performed to obtain audit evidence about the effectiveness of the:

Design of the accounting and internal control system i.e. whether it is suitably designed to prevent and correct material misstatements. n Operation of the internal controls throughout the period.

The auditor carries out tests of controls to determine whether these controls have worked effectively throughout the financial period and can be relied upon to ensure complete, accurate and reliable accounting records.

on the other hand substantive tests are those tests on balances and transactions and other procedures such as analytical review, which seek to provide audit evidence as to the completeness and accuracy and validity of information contained in the records and or the financial statements. substantive tests are those tests carried out by auditors to confirm the assertions of the management i.e. existence, rights and obligations, occurrence, completeness, valuation, measurement and presentations and disclosure.

Substantive tests are of two types:

n Analytical review procedures and

n Tests of details.

You are required to explain the meaning of the following terms:

Teeming and lading

The misappropriation of cash remittances received form customers by using amounts from later remittance to fill the gap left by the earlier misappropriation. For example a cashier misappropriates cash takings in week one. The cashier then uses the cash takings in week two to make up exactly the shortfall from week one. The cash takings from week three are then used to make up the shortfall in cash takings from week two. It can be avoided by not allowing a cashier both to handle remittances received and to make entries in the customer accounts.

Audit trail

The audit trail is a record left by the accounting information system of movements in individual transaction data. This record, in the form of references to the processing of the data, provides a trail of the processing of transactions and other events entered into by the entity. Note that while some accounting information systems provide a visible and complete audit trail, others may provide an invisible and/or incomplete trail.

Depending on the accounting information system, the trail may start from the moment data about the event is first captured within the system to the time of its ultimate disposition in the financial statements. For example, the audit trail of a sales transaction may enable the tracing of the movement in data concerning the transaction from the time the order is placed by the customer until the time the transaction data is included in the appropriate general ledger accounts. The system records may also provide a link to other related transaction cycles. Continuing the example, the system may enable the linking of a particular sales transaction to related cash receipt transactions and inventory transactions. These related transaction cycles may have their own audit trail.

The accounting records in an accounting information system fall into four main categories:

Source documents and other data capture records, such as customer order forms, sales invoices, journal vouchers, time cards, etc..

Data accumulation records (or journals), such as daily cash receipt summaries, weekly payroll summaries, monthly purchases journal, etc..

ⁿ Subsidiary ledgers (or registers), etc. such as accounts receivable ledger, plant and equipment register,

General ledger and financial statement records.

Capital commitment

A commitment is an agreement to perform a particular activity at a certain time in the future under certain circumstances. A capital commitment would therefore include instances where the company has committed to say purchase fixed assets or to purchase items requiring a significant cash outflow. Companies are required by the International Financial Reporting Standards to disclose in their financial statements, the amount of contracts for capital expenditure, so far as not provided for, and the amount of capital expenditure authorised by the directors which has not been contracted for.

You are required to discuss how you would verify the figure of capital commitments in a note to the financial statements

nThe auditor should obtain a schedule of all capital commitments from management.;

will check the authorizations for capital expenditure in the board minutes before the year end to the schedule and I will note any items authorised in the board

minutes which are not included in capital commitments;

will check purchase orders for capital equipment issued before the year-end and check that they are included in the list of items contracted for and at the correct

Some items of capital expenditure may be in progress at the year end e.g. building a new factory. In this case I will check that the amount included in capital commitments is the total amount authorised less the amount included in fixed assets

at the year-end;

will compare this year‘s capital commitments with the previous year and consider whether the change is reasonable. The value of capital commitments is likely to fluctuate, as it will be affected by the general level of capital expenditure and any

major projects;

The auditor should obtain a letter of representation from management to confirm that all commitments have been disclosed.

Based on this work I will conclude whether capital commitments are fairly stated in the financial statements

QUESTION SEVEN

State the basic elements of the scope paragraph of an audit report (4 marks)
Explain how auditors distinguish their responsibilities from those of the directors in respect of financial statements. (4 marks)
Explain the meaning of each of the following terms in relation to audit reports:
i) Circumstances of uncertainty (4 marks) ii) Circumstances of disagreement (4 marks)
Distinguish between the ―except for‖ and the ―subject to‖ audit opinions (4 marks)

(Total: 20 marks)

QUESTION SEVEN

You are required to identify situations when a sampling approach would be appropriate

Where large populations exist, for example for organizations with numerous transactions or where there are many account balances within a class of transactions.

Where the client has adequate internal controls. Where there are no controls it is impossible to use a sampling approach because of increased expected error.

Population being tested must be homogenous in materiality. Where the population is not homogenous it is not possible to select a representative sample;

Items must be separately identifiable therefore sequential numbering is essential. This will facilitate the sample selection process;

Expectation of error must be low, i.e. that the internal control system must be reliable. Where the expected error is high it is not appropriate to use a sampling

approach Judgmental sampling

Judgmental sampling also known as non-statistical sampling

Involves using experience and knowledge of clients business and circumstances to select and test the sample without any mathematical or statistical tools. The auditor does not rely on probability theory and requires the use of judgment in making sampling decisions.

Advantages of judgmental sampling

Its well understood and refined by experience;

Opportunity to bring expertise and knowledge into play in selecting and testing sample

No special statistics knowledge required. The auditor uses his judgment in making

sampling decisions.

No time wasted on the mechanics of statistical tools. More time is spent on auditing the sample units and less on the mechanics of constructing the sample and computing the mathematical implications of the results obtained.

Disadvantages

Unscientific, it does not form a strong basis for defense, i.e., it is difficult to justify why

one selected some items and left out others.

Wasteful and large samples are selected. This is because in an effort to reduce the sampling risk the auditor attempts to select as many items as possible as opposed to statistical sampling where the size of the sample is precisely determined using probability theory.

Samples may not be representative of the population and the results cannot be extrapolated to the population.

Danger of personal bias in sample selection.

Random selection approach

Random sampling by use of random number tables or use of computers to select sampling units.

Advantages

There is no bias in the sample selection. Judgement is not applied in sample selection;

The sample selected is representative of the population because each unit in the population has an equal chance of being selected.

Disadvantage

The approach does not give the auditor an opportunity to apply judgment in sample selection. Exercise of judgment is an important part of the audit process that gives the auditor an opportunity to select items that will enable him to meet his audit objectives.

III) Systematic selection- in which the number of sampling units in the population is divided by the sample size to give a sampling interval. For example 50, and having determined the starting point within the first 50, each 50^th sampling unit thereafter is selected. When using systematic sampling, the auditor will need to determine that sampling units within the population are not structured is such a way that the sampling interval corresponds with a particular pattern in the population.

Advantage

The approach eliminates bias in sample selection.

Disadvantage

The sample selected may not be representative of the population in circumstances where items within the population conform to a certain pattern. The selection of the nth item could therefore result in a sample consisting of similar items and therefore not representative of the entire population

QUESTION EIGHT

Your firm of accountants has been the auditors of Leather Merchants Limited, a company that exports both raw and semi-finished leather products to European and Asian markets. The company has decided to introduce a comprehensive computerised system to manage its accounting and administrative functions.

Required:

) Outline the practical difficulties you would encounter as an auditor as a result of the

proposed introduction of a computerised accounting system. (10 marks) b) Explain how you would overcome the difficulties identified in (a) above(5 marks)

Identify and explain the benefits that the company would derive as a result of putting in

place a comprehensive computerised accounting system ( 5 marks) (Total: 20 marks)

QUESTION EIGHT

You are required to explain the essential elements of the planning process of the audit of the financial statements produced through computerized systems.

Planning refers to developing a general strategy and a detailed approach for the expected nature, timing and extent of the audit. The auditor should plan his work to enable him to conduct an effective audit in an efficient and timely manner.

In developing the strategy the auditor would first need to obtain a good understanding of the clients business. To obtain this understanding the auditor will need to hold discussions with the management of the company, read relevant publications about the industry among other sources of information. This information will assist the auditor to identify potential risk areas that could affect the

financial statements;

Basing on the understanding of the client the auditor will need to determine the staffing requirements for the job. This involves determining how many people will be required on the job and their level of experience. It would also be important to determine the need for experts to assist in carrying out the job. At this point it would be important to evaluate whether there is need to involve IT experts in

carrying out the job;

Seeking to obtain an initial understanding of the client‘s accounting and internal control system. It is particularly important to identify the level of computerization of the operations of the company. This will assist the auditor in determining whether there is a need to involve IT experts and the approach to be adopted such

as the need to use CAATS;

The auditor should consider how a CIS environment affects the audit. Since the use of computers changes the processing, storage and communication of financial information and may affect the accounting and ICS employed by the entity, the auditor should consider how this will affect the audit procedures to be carried out;

When the CIS are significant, the auditor should also obtain an understanding of the

CIS environment and whether it may influence the assessment of inherent and

control risks;

Formulating a job time table showing the plann ed commencement dates and the key deadlines to be met;

You are required to identify eight items you are likely to find the director‟s minute book

It is important to note there are no standardized items that one would expect to find in a director‘s minute book. These vary from situation to situation but one would expect to

find details of key decisions made in regard to the stewardship of the company.

nDetails of authorization of purchase of key assets or to undertake key projects;
n Details of the approval of budgets and other forecasts;
n Details of the directors‘ assessment of the performance of the company;
ⁿ Any key appointments or resignations of key employees edirectors; .g. appointment of new
ⁿ Key business decisions made such as approval of the business strategies to be undertaken by the company;
n Details of approval to obtain working capital financing such as obtaining and overdraft;
ⁿ Decisions to write off assets; n Details of actions taken in case of reported fraud.

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You are required to explain the meaning of the term „audit‟

QUESTION FOUR

Advantages

Disadvantage

Disadvantage

You are required to identify eight items you are likely to find the director‟s minute book

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