ASSURANCE

Time Allowed - 2 hours

Total Marks - 100
[N. B. The figures in the margin indicate full marks. Questions must be answered in English. Examiner will take account
of the quality of language and of the manner in which the answers are presented. Different parts, if any, of the same
question must be answered in one place in order of sequence.]

Marks
1. a. What are the objectives of internal control system?

b. Define Audit Committee. `One of the terms of references of an audit committee may be to
monitor the independence of the external auditor - in light with this write at least one way and
means which the audit committee of a listed company can apply to ensure the independence of
3+6=9
external auditor in the area of service with an assurance client.
c. XYZ Company Limited (XYZ) is a large manufacturing company selling a unique product. It
has an established customer base, but as its product is unique, it also receives regular inquiries
from potential customers that have not bought products from XYZ before. In respect of such
new customers, XYZ has a significant risk of taking orders from customers who might not be
able to pay. What are the internal controls XYZ should set to mitigate this Risk?
7
2. a. What are the risks a Company may recognize in your views in the following areas?
i. Dispatch & Invoicing
ii. Payment for Goods.

2+2=4

b. BAS 500 states that evidence must be sufficient and appropriate. What do you understand by
the term sufficient and appropriate. Explain the procedures outlined in BSA 500 to obtain
evidence.
4+6=10
c. BSA 530 Audit Sampling provides guidance on methods for selecting a sample of items for
testing. Describe in brief FIVE methods of selecting a sample.
3.

Financial statements can be said as the collection of many assertions of management. That is why,
the auditor attempts to collect evidence as to the correctness of those assertions. The BSA requires
that the auditor should use assertions for classes of transactions, account balances, and presentation
and disclosures in sufficient detail to form a basis for the assessment of risks of material
misstatement and the design and performance of further audit procedures.
a. In the context as described above, define financial statement assertions.
b. Suppose, the statement of Financial Position of an entity shows inventories with carrying
amount of Taka 400 million. Mention the relevant assertions that management made for the
inventories.
c. List out and describe the procedures that an auditor might use to obtain audit evidence.
d. Describe four procedures that the auditors of a limited company should carry out to verify the
provision for a pending legal claim against it?

Page 1 of 2

4
8
4

4. a. Define the term Control environment. Why is control environment an overarching element to 3+5=8
institute an effective internal control system?
b. It is found quite common that two types of control activities are established by the
organizations. They are preventive and detective controls. Both types of controls are essential to
an effective internal control system. From the quality perspective, preventive controls are better
because they are proactive. However, detective controls play a critical role by providing
evidence as to whether the preventive controls are functioning at desired level. Below is a list of
some controls the organizations usually apply to achieve the goal of the Internal Control
system.
i. Physical inventories
ii. Segregation of duties
iii. Internal Audit
iv. Approvals and authorizations
v. Variance analysis
vi. Reconciliation.
In light of detective controls and preventive controls, identify the above measures with brief 8
reasoning.
c. Your management asked you to develop a policy for managing petty cash fund appropriately.
State five control points that you should incorporate in the policy to establish proper control
over the petty cash fund.
4
5. a. What are the advantages of principles based framework over a system of ethical rules?

b. There are two main approaches to a code of professional ethics: a rule based ethical code and a
code based on a set of principles. Indicate whether the following statements are true or
false.
6
i.
ICAB's Code of Ethics is principles based.
ii. A code based on a set of rules requires accountants to evaluate and address threats to
independence.
iii. A code based on a set of principles rather than rules is more flexible in a rapidly
changing environment.
c. The ICAB Code sets out a framework for professional accountants to follow when faced with
an ethical conflict. Explain.

Page 2 of 2