1 There are similarities and differences between the responsibilities of internal and external auditors.. Both internal and external auditors have responsibilities relating to the preve
Trang 1Monitoring Test MT2A
Audit and Assurance
(International)
F8AA-MT2A-X08-Q
Time allowed 1.5 hours
All THREE questions are compulsory and MUST be attempted
Do NOT open this paper until instructed by the supervisor
INTERNATIONAL
Trang 21 There are similarities and differences between the responsibilities of internal and external
auditors Both internal and external auditors have responsibilities relating to the prevention, detection and reporting of fraud, for example, but their responsibilities are not the same Both internal and external audit are part of an organisation’s overall corporate governance arrangements Sometimes, the responsibilities of internal auditors are out-sourced to external organisations
Required:
external auditors for the prevention, detection and reporting of fraud and
Your answer should include one example of how an internal audit department in a manufacturing company might fulfil its role under each of the headings above
(20 marks)
2 You are the auditor of Microprods for the year ended 31 March 2008 The company’s main
activity is assembling laptops using bought-in components Detailed cost records are not kept but the production director has estimated that each laptop costs $670 to assemble as follows:
$
670 _
During the year, Microprods started importing notebook computers from a Far Eastern manufacturer Turnover has been slow but the directors are optimistic and spent a considerable amount on a New Year advertising campaign directed at the notebook market Inventory of notebook computers has been included in the accounts at a translated invoice cost of $860 each
All equipment is sold under a twelve-month warranty and the directors wish to provide
$50,000 against warranty claims This amount is considered material to the accounts
Your attendance at the year-end physical count and subsequent audit tests indicate that the inventory was quantified correctly and that proper cut-off procedures were implemented
Trang 3Required:
Describe the evidence you would seek to:
(15 marks)
3 You are the senior in charge of the audit of Phoenix, a private limited liability company,
which manufactures super alloys from imported zinc and aluminium The company operates three similar foundries at different sites The draft accounts for the year ended 31 March 2008 show profit before taxation of $1·7m (2007 – $1·5m)
Your assistants have bought to your attention the following points:
(1) A trade investment in 60,000 $1 ordinary shares of Pegasus, one of the company’s
major shipping contractors, is included in the statement of financial position at cost
of $80,000
In May 2008, the published financial statements of Pegasus as at 30 September 2007 show only a small surplus of net assets A recent press report now suggests that Pegasus is insolvent and has ceased to trade
Although dividends declared by Pegasus in respect of earlier years have not yet been paid, Phoenix has included $15,000 of dividends receivable in its draft accounts as
(2) Current liabilities include a new $500,000 provision for future maintenance This
represents the estimated cost of overhauling the blast furnaces and other foundry equipment The furnaces were purchased five years ago and require their fire-brick linings to be replaced every five years
The overhaul is planned for August 2008 when all foundry workers take two weeks
Required:
(15 marks) End of Question Paper