QUESTION 1 a) Compare and contrast managements responsibility for an entitys financial statements with the auditors responsibilities for

detecting errors and fraud in the financial statements. (10 marks) Explain the issues to be considered in assessing materiality. (10 marks) (Total: 20 marks)

b)

QUESTION 2 Gbane Ltd is a major distributor of wax prints located in the central part of Accra. You are currently carrying out the final audit for the year ended 31st March 2008. The draft balance sheet as at 31st March 2008 and the audited balance sheet as at 31st December 2007, are set out below: 2008 2007 GH000 GH000 GH000 GH000 Fixed Assets: Buildings 1,500 1,000 Motor vehicles 450 300 1,950 1,300 Current Assets: Stock 150 100 Debtors 55 40 Cash & Bank 52 45 257 185 Total Assets Liabilities & Capital: 2,207 1,485 Trade creditors 60 50 Other creditors 25 85 50 Capital Surplus Stated capital Capital surplus Income surplus Total liability and capital 1,400 670 50 2,207 1,400 35 1,485

Other creditors relates to provision for legal claims brought against the company by a client for breach of a contract. 1

You are required to: (a) (b) (c) State five (5) audit objectives relating to the audit of tangible Fixed Assets (5 marks) List five (5) controls which would assist in reducing control risk associated with tangible fixed assets. (5 marks) As an auditor, outline how you will obtain evidence about legal claims mentioned above. (10 marks) (Total: 20 marks)

QUESTION 3 a) (b) Explain the process of a systems-based audit (10 marks)

Auditors are required to obtain sufficient and reliable evidence to support the audit opinion.

Required: (i) (ii) State the importance of management representation as audit evidence. (5 marks) Indicate the factors to be considered in determining the quality of audit evidence. (5 marks) (Total: 20 marks)

QUESTION 4 Verification is a technique adopted by the auditor to ensure existence, completeness, ownership, valuation, disclosure and presentation. Required: a) Indicate the verification objective that each of the following tests seeks to achieve: (i) Compare fixed assets in general ledger with the fixed assets register and obtain explanation for differences. 2

(ii) (iii) (iv) (v) b) c)

Review records of income yielding assets to determine whether all income has been received. Consider the adequacy of provision for depreciation. Verify title to land and building. Undertake a physical inspection of fixed assets. (5 marks)

State the audit test you will perform when verifying disposal of a fixed asset. (7 marks) State the uses of computers to an auditor. (8 marks) (Total: 20 marks)

QUESTION 5 (a) Nyame Ltd is a manufacturing company preparing its annual financial statements to 31 st December. It is a long standing audit client of your firm.

Required: State the work you would perform prior to the commencement of the field audit of Nyame Ltd. (10 marks) (b) Briefly explain the following terms: (i) (ii) (iii) Risk-based audit Inherent risk Audit software (2 marks) (2 marks) (5 marks) (Total: 20 marks)