Legal and professional framework

Subject Title: Auditing and Assurance Revision Kit

Topic: Legal and professional framework

QUESTION 1
December 2022 Question Three B
Haki Yangu is an ordinary shareholder in Mizani Ltd. He has instituted a criminal liability case against the auditors of Mizani Ltd. as a result of his reliance on the information presented in the company’s audited financial statements.

Required:
(i) Highlight FOUR actions by an auditor that could make him criminally liable under the Companies Act in your jurisdiction. (4 marks)

(ii) Describe THREE circumstances that Haki Yangu is required to prove against the auditors for a successful criminal liability case under the Companies Act in your jurisdiction. (6 marks)

QUESTION 2
August 2022 Question Two A
Describe four strategies that an auditor may deploy to reduce exposure to professional liabilities. (4 marks)

QUESTION 3
April 2022 Question Four C
Highlight five threats to an external auditor’s independence. (5 marks)

QUESTION 4
September 2021 Question Five
The key element of the external audit and internal audit is the independence of the individual or the firm holding the appointment or in the case of internal audit, the status of the internal audit department in the organisation.

However, if the auditor is to carry out his function independently, he must be granted access to all the information he requires.

Required:
(a) Explain two reasons why the internal and external auditors need to be granted access to all information required. (4 marks)
(b) Discuss whether the right of access granted to internal and external auditors creates any obligations for the auditor. (2 marks)
(c) Evaluate seven circumstances which may give rise to auditor’s legal liability.
(14 marks)
(Total: 20 marks)
QUESTION 5
May 2021 Question Two A
You have been invited by the accountancy professional body in your country as a guest speaker during thcir annual seminar. Your topic of presentation is “Professional judgement and professional scepticism in the conduct of external audits”.

Required:
(i) Distinguish between “professional judgement” and “professional scepticism”.
(4 marks)
(ii) Analyse four decision areas whereby auditors should exercise professional judgement in the conduct of an audit. (8 marks)

QUESTION 6
November 2020 Question Four B
Discuss five mechanisms that the management of an audit firm could use to ensure compliance with the professional code of ethics by members of staff. (10 marks)

QUESTION 7
November 2019 Question Five B
Kaka Kimenju& Co. is an international audit firm with a number of clients listed on the securities exchange. Recently, the firm held a staff training session on quality control.

During the meeting, the members of staff were invited to raise matters from their past experiences relating to the ethical code on independence. Some of the matters raised are outlined below.
1. Shortly, before commencing the final audit of AKZ Ltd, a listed company, a junior staff member on the audit team inherited a substantial number of shares in that company. No action was taken because, although representing a large investment for the staff member concerned, the number of shares were totally immaterial with respect to the company. Moreover, the partner knew that when the company’s results would be announced, the share price would rise and he did not think it was fair to acquire the staff member to sell them before hand
2. The management accountant of ABC Ltd, a listed client had an accident and was away from work for three months. At the time of the accident, the audit senior was winding up the prior year’s audit. Given his familiarity with the company’s management accounting system, it was agreed that he would take over as the management accountant for the three months
3. Kaka Kimenju & Co. warned its client , MKN Ltd., that its computer system lacked essential controls. Subsequently, MKN Ltd., decided to install a totally new system and Kaka Kimenju and Co.’s management consultancy department was appointed to design the new system

Required
Evaluate whether Kaka Kimenju & Co. had complied with the ethical code on independence or had acted unprofessionally in any other way with respect to each of the above scenarios (12 marks)

QUESTION 8
May 2019 Question Two A
Describe three responsibilities of an auditor in the audit of general purpose financial statements. (6 marks)

QUESTION 9
May 2019 Question Two D
Outline four safeguards that an audit firm could implement to address potential conflicts of interest when auditing two competing clients. (4 marks)

QUESTION 10
November 2018 Question One A
Analyse two types of threats that might arise from an audit firm accepting to undertake non-audit related services to its client. (4 marks)

QUESTION 11
November 2018 Question One B
In the context of the Companies Act, outline four statutory rights of an auditor. (4 marks)

QUESTION 12
November 2018 Question Four C
Explain three ethical threats which might affect the independence of audit practitioners and for each threat, explain how it might be reduced to an acceptable level. (6 marks)

QUESTION 13
May 2018 Question Five C
Discuss four reasons why an auditor might decide not to seek for re-election. (8 marks)

QUESTION 14
November 2017 Question Four B
Discuss the importance of the following provisions of professional ethics:
(i) Audit fees. (2 marks)
(ii) Conflict of interest. (2 marks)
(iii) Due care and skill. (2 marks)

QUESTION 15
May 2017 Question Two C
Outline two benefits of the auditor communicating with those charged with governance.
(2 marks)
QUESTION 16
May 2016 Question Two D
In the context of International Standard on Auditing (ISA) 260 – “Communicating with those charged with governance”. describe three matters that the auditor should communicate to those charged will in relation to auditor independence. (6 marks)

QUESTION 17
September 2015 Question One C
Explain five fundamental principles set out in the Code of Ethics for professional accountants. (5 marks)

QUESTION 18
September 2015 Question Three C
Explain the term “International Standards on Auditing”. (4 marks)

QUESTION 19
September 2015 Question Four B
Discuss the legal responsibilities of an auditor to shareholders and third parties during the course of their normal professional engagement and the mitigation measures that auditors may institute. (8 marks)

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