Planning and Risk Assessment – Questions and Answers

Subject Title: Auditing and Assurance Revision Kit

Topic: Planning and Risk Assessment

QUESTION 1
April 2022 Question Five A
Your audit firm was recently appointed the auditor of Jisifu Ltd. The company has a subsidiary based in western part of the country and its auditors had retired the previous year.

Required:
Assess four factors that would influence you in determining whether or not to send a separate engagement letter to the subsidiary. (4 marks)

QUESTION 2
January 2022 Question One C
Describe six activities that an audit firm should perform prior to accepting a new audit engagement. (6 marks)

QUESTION 3
December 2021 Question Two A
International Standards on Auditing (ISA) 210 “Agreeing the terms of Audit engagements” requires that the auditor and the entity should agree on the terms of engagement in an audit engagement letter or other suitable form of contract. Required:
(i) Explain two objectives of an engagement letter. (4 marks)
(ii) Highlight eight contents of an audit engagement letter. (8 marks)

QUESTION 4
December 2021 Question Three A
According to International Standard on Auditing (ISA) 220. “Quality Control for an Audit of Financial Statements” the auditor should consider certain factors before accepting a new engagement or continuing an existing engagement. With reference to the above standard, discuss three such factors. (6 marks)

QUESTION 5
May 2019 Question Four C
Discuss four circumstances which might cause an auditor to change his risk assessment of a client company. (8 marks)

QUESTION 6
May 2019 Question Four D
Examine the importance of materiality assessment to an auditor. (3 marks)

QUESTION 7
November 2018 Question Three A
Describe the process that an auditing firm should undertake to assess whether pre-conditions for an audit are present when accepting an audit assignment. (4marks)

QUESTION 8
May 2018 Question One B
International Standard on Review Engagements (ISRE) 2400 “Engagements to review Financial Statements” sets out the objective, general principles and procedures to be applied for a review engagement.

Required:
Explain six main procedures which an auditor should perform when conducting a review engagement. (12 marks)

QUESTION 9
November 2017 Question One B
Describe three circumstances in which the management of an organisation might request the auditor to change the terms of an audit engagement. (6 marks)

QUESTION 10
November 2017 Question Five A
Highlight six reasons why an auditor might need to understand the entity and its environment before undertaking an audit assignment. (6 marks)

QUESTION 11
May 2017 Question Three B
Your audit firm was recently appointed the auditor of Baraka Ltd. The company has a subsidiary based in Mombasa and its auditor had retired the previous year.

Required:
(i) Enumerate six factors that would influence you in determining whether or not to send a separate engagement letter to the subsidiary. (6 marks)

(ii) If the audit of Baraka Ltd. was a recurring audit, suggest six factors that would make it appropriate for you to send a new engagement letter. (6 marks)

QUESTION 12
May 2017 Question Four C
Discuss three responsibilities of the external auditor in relation to prevention and detection of fraud. (6 marks)

QUESTION 13
November 2016 Question One A
In the context of International Standards of Auditing (ISA) 210 “Agreeing the Terms of Audit Engagements’’, discuss six steps the auditor should undertake to establish whether the pre-conditions for an audit were present. (12 marks)

QUESTION 14
November 2016 Question Four B
For financial reporting purposes, the entity’s risk assessment process includes how’ management identifies business risks relevant to the preparation of financial statements in accordance with the applicable financial reporting framework.

Required:
Discuss six circumstances in which risks in an entity might arise or change. (12 marks)

QUESTION 15
May 2016 Question Three C
Explain four purposes of an audit program. (8 marks)

QUESTION 16
May 2016 Question Five B
Explain four ways in which the auditor might minimise risk during a particular audit.
(8 marks)
QUESTION 17
November 2015 Question Five A
Your audit firm was recently appointed the auditor of ABC Ltd. for the first time. ABC Ltd. requires that the audit be concluded within two months after the end of the financial year.

Describe the steps your audit firm would take prior to accepting this appointment.
(10 marks)
QUESTION 18
September 2015 Question One D
During preliminary audit planning you note that the engagement letter has been returned unsigned by the directors of Shangilia Africa Ltd. When asked to explain their action, the directors indicate that they cannot allow you access to information on the company’s new website development as this contains various trade secrets. You would not, therefore, be able to perform audit procedures on the research and development expenditure incurred on the website and included in non-current assets.

Briefly explain four actions you would take as a result of directors not signing the engagement letter. (4 marks)

QUESTION 19
September 2015 Question Three B
Describe the steps an audit firm should perform prior to accepting a new audit engagement. (5 marks)

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