Section I (Answer All Question) - Open- Ended Question
Question 1:
(a) State any five distinguish between internal check and internal control system.
(b) You are working as senior auditor in TCS .Finance Manager sent mail to you about the efficient control system and to give your opinion on internal check and internal control system. Which method would you suggest for the implementation of efficient control system? Justify your answer with supporting information.
Section II (Answer All Questions) - Case Studies
2. Mr. Salim has started a new business of selling of Handloom items. He purchases these items from a factory situated in Dubai and sells to local customers at a price which give him reasonable amount of profit. All gets well in the first year and he earns some income from the business.
He needs more money to expand his business. He decides to ask his friend Mr. Said to invest in the business. Having seen the potential of Mr. Salim business, Mr. Said wants to invest, but neither he wants to manage nor wants to have ultimate liability for the debts of the business in case business fails. He therefore suggested that they should set up a partnership firm. He will be the owner of the firm and will be entitled to get profits. On the other hand, Mr. Salim, would be the Manager and be paid a salary.
At the end of the first year of trading when Mr. Said receives copy of the financial statements, he finds that Profits are much lower than what was expected.
Mr. Said seeks solution for his following problems;
(a) Mr. Said knows that Mr. Salim is paid salary so he may not care for low profits.
(b) Mr. Said is concerned by the level of profits and feels that he wants further assurance on the accounts.
(c) He does not know whether the accounts give a true and fair view of the last year's trading because the profits do not seem as high as those Mr. Salim had predicted when he agreed to invest.
Give your opinion and justifiable solutions to above problems and also state essential qualities of a successful auditor.
3. Ahmed has been appointed as auditor of the Z- Max LLC. Mr Ahmed is requested to audit the financial statements for the year 2019. While auditing the books of accounts, it was found that the total amount of cash received from clients is showing in the correct balances in the customers' account but in the cash book shows a less amount of cash received from client. The works of the accountant is not verified by the manager or owner of the business. While auditing the books of accounts, Mr Ahmed not followed the guidelines used by auditor while conducting and writing the audit report .The management requested Mr. Ahmed to finish the audit fast and they are willing to pay more audit fee. The management will only provide limited access to its books of accounts and not provide adequate supporting evidences or documents for verification and authenticity of the transactions.
a. Do you think there was some fraud in the above statements? Justify your answer with supportive data or information.
b. If you are Mr Ahmed, will you accept the audit engagement? Justify your answer with complete details.
c. How such things can be avoided?
d. Mr Ahmed didn't follow the guidelines while auditing the financial statement. Suggest the guidelines to be followed by Z- Max LLC while conducting the audit.
Section III (Answer All Questions) - Application Questions
4. An NGO operating in Muscat had collected large scale donations for Makunu strom victims. The donations so collected were sent to different NGOs operating in Salalah for relief operations. This NGO operating in Muscat has appointed you to audit its accounts for the year in which it collected and remitted donations for Makunu storm victims.
(a) What type of audit programme would you recommend in the above situation?
(b) Draft (Specimen) audit programme for audit of receipts of donations and remittance of the collected amount to different NGOs.
(c) Prepare detailed contents of audit programme for NGO operating in Muscat.
5. Discuss in details the application of accounting principles applied in preparation of the financial statement with suitable examples.
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