QUESTION 1 Verification is a technique adopted by the auditor to ensure the existence of business assets and liabilities, their ownership

and valuation, completeness, appropriate presentation and disclosure. Required: a) i) ii) iii) b) State the audit work you will carry out when verifying the following: Goodwill Deferred Oil Exploration Cost Patent Rights (15 marks) State the procedures you will follow to confirm the value of investments. (5 marks) (Total: 20 marks)

QUESTION 2 a) Evidence comes in various types and has different degrees of reliability. The following are some statements that compare various types of evidence. i) ii) iii) iv) A bank confirmation versus segregation of duties between cash receipts and recording of the receipts in the accounts receivable subsidiary ledger. An auditors recalculation of depreciation versus examination of raw material requisitions. A bank statement included in the clients records versus shipping documents. Physical examination of share certificates versus physical examination of inventory components for a personal computer.

Required: For each situation, indicate whether the first or second type of evidence is more reliable. Provide a reason for your choice. (14 marks)

b)

State six (6) control measures that should be put in place to prevent and detect unauthorized changes to programmes in the computer environment. (6 marks) (Total: 20 marks)

QUESTION 3 a) K. Marfo Ltd is a company which has branches across the ten regions of the country. The management of the company is contemplating introducing continuous audit to supplement its current practice of final audit.

Required: (i) (ii) b) Required: Briefly describe the work the assigned audit team will carry out at the planning stage of your next audit. (10 marks) (Total: 20 marks) Explain briefly the term continuous audit. (2 marks) What are the advantages and disadvantages associated with this type of audit? (8 marks) K. Marfo Ltd is a client of an audit firm in which you are an audit officer.

QUESTION 4 You are the audit senior in charge of Zaid Ltd, a company that has been trading for over twenty years. The companys financial year ends on 30th June.

The draft balance sheet of Zaid Ltd on 30th June, 2007 showed current assets as follows: 30th June 2007 GH 29,400 12,000 100 41,500 30th June 2006 GH 26,460 800 110 34,570

Trade debtors Bank Prepayments Required: (a) (b) (c)

As audit senior, state the internal control measures you expect to exist over the clients trade debtors. (7 marks) State the audit work you would carry out to verify the adequacy of the bad debts provision for 2007 financial year. (8 marks) Outline the substantive tests you will carry out in the audit of prepayments appearing on the above balance sheet. (5 marks) (Total: 20 marks)

QUESTION 5 a) It is important that auditors independence is beyond question and that he should behave with integrity and objectivity in all professional and business situations. For each of the situations below, explain why the objectivity of the external auditor may be threatened. (i) The firm provides other services to audit clients. (ii) The firm accepts goods, services or hospitality from an audit client. (iii) There are family or other close personal or business relationship between the firm, its partners or staff and audit clients. (iv) There is undue dependence on audit client or group of clients. (v) The firm, its partners, or staff have financial interest in an audit client. (15 marks) b) Briefly explain five (5) reasons why it is important for audit working papers to be reviewed. (5 marks) (Total: 20 marks) 3