Question

You are about to issue the auditor’s report for Ayewaso Company Ltd, a listed client.
Half way through the year the company suffered a major computer systems failure
which destroyed the accounting records for the year to date. Backups have not been
kept so the company has had to reconstruct the figures for the first six months.
1. Which opinions are most appropriate for Ayewaso Company Ltd?
A. Qualified or adverse
B. Unmodified or adverse
C. Unmodified or disclaimer
D. Qualified or disclaimer
2. What is the purpose of the Basis of Opinion paragraph in an auditor’s report
which contains an unmodified opinion?
A. To state the opinion on the financial statements
B. To confirm the audit has been conducted in accordance with ISAs and ethical
requirements
C. To highlight a material uncertainty relating to going concern which has been
adequately disclosed
D. To highlight management responsibilities to the users of the financial statements
3. Which of the following shows the correct order of the elements to be included in
the auditor’s report of Ayewaso Company Ltd?
A. Opinion, date, auditors address, signature
B. Title, opinion, signature, key audit matters
C. Addressee, opinion, auditor’s responsibilities, date
D. Responsibilities of management, basis for opinion, date, addressee
4. Which of the following describe the wording of a disclaimer of opinion?
A. The financial statements give a true and fair view
B. The financial statements do not give a true and fair view
C. The auditor does not express an opinion on the financial statements
D. Except for the matter described, the financial statements give a true and fair view
5. Which of the following could NEVER be the responsibility of an internal
auditor?
A. Risk management
B. Organizational control
C. Corporate governance
D. Audit report to shareholders

You are about to issue the auditor’s report for two listed clients, Kejetia Co and Kwadaso Co.
The financial statements show the following:
Kejetia Kwadaso
GH¢’000 GH¢’000
Profit before tax 10 245
Total assets 2,300 6,500
Uncorrected Misstatements:
Overstatement of receivables due to an
Irrecoverable debt not being written off 15
Overstatement of inventory due to failure to
Value at lower of cost and NRV 85
6. Which of the following is the most appropriate opinion for Kejetia Co?
A. Adverse
B. Disclaimer
C. Qualified
D. Unmodified
7. Which of the following is the most appropriate opinion for Kwadaso Co?
A. Adverse
B. Disclaimer
C. Qualified
D. Unmodified
8. How would your answer change for Kwadaso Co if the misstatement of
inventory had been GH¢10,000 instead of GH¢85,000?
A. Adverse opinion.
B. Unmodified opinion with emphasis of matter
C. Qualified opinion
D. Unmodified opinion
9. You have identified material uncertainties relating to going concern during your
audit of Kejetia Co. these have been adequately disclosed by management. How
will this impact the auditor’s report?
A. The report should include a section titled ‘Emphasis of Matter’ which will refer to
the management’s disclosure note
B. The report should include a section titled Material Uncertainty Related to Going
Concern’ which will refer to the management’s disclosure note
C. The report should include a section titled ‘Going Concern issues’ which will refer
to the management’s disclosure note
D. As management have adequately disclosed the uncertainties relating to going
concern, the auditor does not need to modify the reports as the financial
statements include the appropriate information

10. Which of the following statements is true?
A. Random sampling is a method where the auditor picks the sample with no
particular pattern
B. Deviation must be extrapolated to determine the effects on the population
C. Block sampling is where the auditor tests all items in a population
D. Monetary unit sampling is a statistical method of sampling
11. Which of the following constitutes sampling?
A. Where less than 100% of the items in a population are tested and have an equal
chance of selection
B. Where less than 100% of the items in a population are tested and have a chance of
selection
C. Where items within a population with certain characterises are chosen for testing
D. Where every nth item in a population are chosen for testing
12. Which of the following statement is true?
A. Statistical sampling methods are more reliable than non- statistical methods
B. The auditor must always use stratification to ensure a representative sample is
tested.
C. More than one sampling method may be used to test one population
D. A deviation occurred when a result differs from expectation during a substantive
procedure
13. Which of the following would you NOT expect to see in a current file?
A. Bank reconciliation
B. Inventory count details
C. Engagement letter
D. Replies from customers relating to a circularisation
14. The objective and scope of the internal audit function vary wide and depend on
the structure and size of the entity plus the requirement of management. Which
TWO of the following functions could internal audit perform and still operate
effectively?
A. Examining financial and operational information for management
B. Reviewing accounting system and related controls
C. Approving annual budgets
D. Preparing reconciliations between the receivable’s ledger control account and
receivables ledger

15. Which of the following does NOT belong in the auditor’s report?
A. Auditor’s address
B. Basis of the opinion
C. Involvement of any specialist
D. Statement of responsibilities of auditors
16. The audit committee should be comprised of?
A. An equal number of directors and shareholders representatives subject to a
maximum of ten members
B. An equal number of directors and shareholders representatives subject to a
maximum of six members
C. directors and shareholders representatives with directors forming the majority
D. directors and shareholders representatives with shareholders representatives
forming the majority
17. What is meant by the expression ‘expectation gap’?
A. The gap between how the director of the company perform their duties and how
shareholders expect them to perform
B. The gap between how the director of the company perform their duties and how
the general public expects them to perform
C. The gap between the public perception of the role of company auditors and their
statutory role and responsibilities
D. The gap between the auditor’s own perception of their duties and how they are set
out in the Companies Act.
18. The auditor is required to?
A. Accumulate all material misstatements found during the audit, unless they are
immaterial
B. Communicate to the credit controller the effect that uncorrected misstatement may
have on the auditor’s report
C. Reassess materiality after evaluating the effect of uncorrected misstatements
D. Accumulate all material misstatements found during the audit, unless they are
clearly trivial
19. Value for money audit does NOT involve
A. Effectiveness
B. Extension
C. Efficiency
D. Economy
20. Which of the following process is NOT a process normally reviewed by an
operational internal audit assignment?
A. Procurement
B. Marketing
C. External audit
D. Human resources
SECTION B (20marks)
Answer all the questions in this section. The section contains two parts. The first part
contains statements that are either true or false. You should indicate your answer by
writing ‘A’ if a statement is true or ‘B’ if a statement is false. The second part requires you
to answer questions from a case/scenario .
PART ONE
Answer all questions in this part. Each question carries one (1/2) mark.
Regarding the reasons for preparing audit documentation, select whether each of the
following statements are true or false.
21. To retain a record of matters of continuing significance to future audits
A. True
B. False
22. To provide evidence of audit work carried out in the event of a legal dispute
A. True
B. False
23. To enable an experienced auditor to carry out quality control reviews
A. True
B. False

You are currently performing subsequent event procedures for the audit of Onipa Nua
Company. From a review of the board minutes you identifying that a customer is suing the
company for an injury they suffered on the client’s premises on February 5 2010. The client’s
year-end is 31 January 2010. The directors are proposing to amend the financial statements to
include a provision for the amount of compensation they expect to have to pay to the
customer. Legal advice received indicates that the claim is possible to succeed
Which of the following statements is true with regard to subsequent events?
True False
24. The auditor must perform audit procedures to identify events
occurring after the date of the financial statements up to the
date the auditor’s report is signed that could have an effect on
the financial statements
25 The auditor has no responsibility after the auditor’s report has
been singed, even if they become aware of events occurring
which means the opinion s is now incorrect
26 The auditor does not need to consider any events which occur
after the date of financial statements as it is outside of the
reporting period
27 The auditor only needs to consider subsequent events
communicated to them by the directors
Which of the following statements is true in respect of adjusting events?
True False
28 Adjusting events are those events which occur before the
auditor’s report have been signed
29 Adjusting events are those which occur after the year -end
date
30 Adjusting events are those which occur after the year-end
date and provides evidence of a condition existing at the yearend date
31 Adjusting events require disclosure in the notes to the
financial statements
32 Events after the reporting period may be adjusting or nonadjusting
In respect of the customer’s claim, which of the following statements is true?
True False
33 If the claim was probable rather than possible, a provision
should be recognized in the financial statements dated 31
January 2010
34 The injury was caused after the year-end therefore was not a
condition in existence at the year-end
35 The injury was caused after the year-end therefor has no
impact on the financial statements being audited
36 The claim is an adjusting event and the financial statements
should reflect the claim
Identify whether the following statements are true or false
True False
37 Internal audit reports must be produced in a standardised
format as set out by the financial reporting framework
38 Internal audit reports are issued to shareholders
39 There is no legal requirement for companies to have an
internal audit department
40 The presence of an internal audit function may act as a
deterrent for fraud

PART TWO
Answer all questions in this part. This part requires you to read the case/scenario carefully
and answer the questions that follow. This question carries10 marks.
(a) Define 'tests of control' and explain the importance of tests of control in the audit of a
company.

(b) You are an audit senior in Asenso Boateng & Co a firm providing audit and assurance
services. One of your clients is an exclusive hotel called 'Rock City Hotel' situated in the
centre of Airport City Accra. As part of your audit procedures you are assessing the controls
surrounding payroll. You have read last year's audit file and have obtained the following
information:
The hotel employs both full and part time staff. Due to the nature of the business most of
the work is done in shifts. All staff are paid on a monthly basis.
New members of staff are given an electronic photo identification card on the day they join
by the personnel department. This card is used to 'clock in' and 'clock out' at the start and
end of the shift to record the hours worked.
At the end of each week the information recorded on the system is sent automatically to
the payroll department and also to the head of each of the three main operating divisions:
Rooms, Food & Beverage and Corporate Events. Each division head must reply back to the
payroll department by email to authorise the hours worked by their staff.
The payroll clerk collates all the authorised information and then inputs the hours worked
into a standardised computerised payroll package. This system is password protected using
an alphanumerical password that is only known to the payroll clerk and the finance
manager.
Once the hours have been entered, the calculation of the gross pay and taxation are
calculated automatically along with any other statutory deductions. At the end of the
calculations a payroll report is produced and printed. The finance manager reviews the
report and compares the data to last month to identify and follow up any unusual variances.
When he is satisfied with the information, he authorises the payroll run by signing the
payroll report and the payroll clerk submits the data.
Payslips are sent to the home address of each employee and payment is made by bank
transfer.
Required:
With reference to the scenario:
(i) Identify and explain FOUR STRENGTHS within the hotel's internal control system in
respect of payroll.

(ii) For each of the identified strengths, state a test of control the auditor could perform to
assess if the controls are operating effectively.

(Total: 10 marks)
SECTION C

SECTION C
Answer ‘question one’ and any other two. All questions carry equal marks (20 marks
each).
QUESTION ONE
(a) You are the audit manager in charge of the audit of Die Hard Company Limited, a
company that has been trading for 20 years selling Computers and its accessories directly to
the public and has recently become a listed company. The company’s year-end is 31
December.
Current liabilities are shown on Die Hard Co's statement of financial position as follows:
Trade payables 884,824 816,817
Accruals 56,903 51 ,551
1,001,727 868,368

Required:
List the substantive audit procedures that you should undertake in the audit of current
liabilities of Die Hard Co for the year ended 31 December 2018. For each procedure, explain
the purpose of that procedure.

b) During the year ended 30 June Year 6, Nungua Ltd acquired freehold land at a cost of
GHC 500,000 and built a distribution centre on it, using a mixture of subcontract and own
labour. The distribution centre cost a total of GHC 200,000 to construct. The construction was
completed by the end of April.
Required:
Set out the audit objectives in respect of the above and the substantive procedures you would
carry out to achieve those objectives

c) Patapaa Transporters – Bank and cash
You are the external auditor of Patapaa Transporters, a public limited company. The
company’s year-end is 31 December. The bank and cash figure included in Patapaa
Transporters’ draft financial statements is comprised of a number of bank account balances.
The finance director has informed you that all accounts have been reconciled as at the year end.
The following is a reconciliation statement of one of the accounts.
Patapaa Transporters
Bank reconciliation as at 31 December 2019 GHC
Balance per cash book (180,345.22)
Add Unpresented cheques 2,223.46
Less Outstanding lodgements (1 ,600.34)
Difference 1.34
Balance per bank statement (179,720.76)
Required:
Describe the substantive procedures the auditor should perform to verify the bank and cash
balance of Patapaa Transporters.

d) Santasi Limited
Santasi Ltd is a listed construction company with an annual revenue of GHC50m. Santasi
Limited's draft statement of profit or loss shows a profit before tax for the year ended December
31, 2008 of GHC40m.
Santasi Limited's audit firm are conducting an audit. This is the first audit of Santasi Ltd that
this audit firm have conducted. An enquiry to the previous audit firm revealed no reasons for
concern. On completing audit work at the company's premises, the audit senior drafts a memo,
extracts from which are reproduced below:
(i) Inventory valuation
Inventories include GHC7m, at cost, for scrap rubber from used car tyres. This material is
widely used as a road surface in other countries. Contracts for road building with this country's
Highways Agency, the state authority for road construction, do not currently permit the use of
this material. However, the matter was known to be under review and on being offered a special
purchase of this material, Santasi Limited speculated on a favourable outcome of this review
and purchase the material. In February 2009, shortly before the financial statements were
approved by the directors, the Highways Agency reported that it would not, currently, accept
the use of this material. If used on non-Highways Agency contracts the material's net realisable
value would not exceed GHC2m.
The finance director maintains that the issue of the Highways Agency report was a nonadjusting event after the reporting period. The write down of the inventory should, therefore,
be reflected in the next period's financial statements.
(ii) Contingent liability
The company is being sued for GHC50m by the Highways Agency for defective work on a
recently completed road. The company maintains that it met the Highways Agency's
specification and it is the Agency's engineers who are at fault in drawing up the specification.
Santasi Limited maintains that it has no case to answer, that the possibility of loss is remote
and that the claim need not be disclosed as a contingent liability. An investigative journalist
has recently published an article suggesting that other roads constructed by the company exhibit
similar faults. The managing director has admitted that the company's road building techniques
are under investigation by the Highways Agency. If the company were to lose the case its future
going concern would be threatened. No disclosure has been made in the financial statements.
Required:
For each of the following two issues, discuss whether the financial statements require
amendment and describe the impact on the auditor's report if the issue remains unresolved.
(i) Inventory valuation
(ii) Contingent liability

QUESTION TWO
You are an employee of Bawumia, Jennifer & Co, a firm of Chartered Accountants providing
audit and assurance services. Your firm has a number of clients across the country. During
the audit of some of the clients, for the year ended 31 December, 2019, your interim audit
revealed the following issues:
(a) Animo Company operates a perpetual inventory system. No year-end count is
performed. You have reviewed the level of adjustments made each month after each
perpetual count and concluded that due to the significance of the adjustments, the inventory
system is not reliable. You have requested that a full year-end count is performed but
management have refused saying it would be too disruptive. The inventory balance is GHC4
million. Sales revenue is GHC50 million and profit for the year is GHC15 million.
(b) Awurade Hwe Ltd has not made allowance for an irrecoverable debt of GHC50,000 in
respect of a customer declared bankrupt just after the year-end. Profit for the year is
GHC500,000.
(c) Nkran Ltd is being sued by a competitor for the theft of intellectual property. The
amount of the claim is material and the case could go either way. The claim is not mentioned
anywhere in the financial statements.
(d) Good Old Days Ltd is a cash retailer. There is no system to confirm the accuracy of cash
sales.
(e) Kumasi Suame Company Ltd is involved in a major court case that would bankrupt the
company if lost. The directors assess and disclose the case as a contingent liability in the
accounts. The auditors agree with the treatment and disclosure.
Required:
For each of the above situations describe the implications for the independent auditor's report.

QUESTION THREE
Adesewase Bank Limited has been trading for several years selling universal banking
products and has recently been listed on the Ghana Stock Exchange. In accordance with
good corporate governance principles Adesewase Bank Ltd maintains a small internal audit
department. On 10 November, 2019, the Board met to discuss whether to maintain the
internal audit department and increase its size and build its expertise.
The board feel that the authorized business of the Company is banking which is core to the
success of the Bank and are therefore required to comply with corporate governance
principles in order to maintain its listed status and banking license due to the current banking
crises in Ghana.

The Board is considering setting up an audit committee, but has proposed the Managing
Director, the finance director any either the operations manager or the head of marketing. He
believes that if they will appoint anybody at all from outside then they should be thinking of a
strong industry player or a lawyer. His strong argument is that as a bank they do not need
more non-executive directors as there are currently two nonexecutive directors out of the
Seven board members. He is considering appointing one of his close friends, who is a retired
medical officer of Nandom Teaching Hospital as a non-executive director
Abigail Acheampong is the chairman of Adesewase Bank and currently the Chief Executive
Officer. Abigail has a domineering character is unsure if they may need additional
committees apart from the audit committee, as setting up more sub board committees
becomes unnecessary financial burden on the Bank
The shareholders are Institutional shareholders and other individual shareholders (numbering
over 500) and due to their large numbers and other considerations, the directors believe that it
is impractical and too costly to hold an annual general meeting of shareholders. Instead, the
board has suggested sending out the financial statements and any voting resolutions by email
for shareholders to vote on the resolutions via email.
Required:
In respect of the corporate governance of Adesewase Banking Limited:
i) Identify and explain Five (5) corporate governance weaknesses; and
ii) Provide a recommendation to address each weakness.
(b) In a company, the internal auditor has carried out an audit of accounts receivable at the
balance sheet date. His test included a debtors’ circularisation, a review of payments after
date, an analysis of the systems of internal control and arithmetic check on the balances. In
these circumstances to what extent would the external auditor be justified in not undertaking
any audit test in this area in the course of his own audit

The Board is considering setting up an audit committee, but has proposed the Managing
Director, the finance director any either the operations manager or the head of marketing. He
believes that if they will appoint anybody at all from outside then they should be thinking of a
strong industry player or a lawyer. His strong argument is that as a bank they do not need
more non-executive directors as there are currently two nonexecutive directors out of the
Seven board members. He is considering appointing one of his close friends, who is a retired
medical officer of Nandom Teaching Hospital as a non-executive director
Abigail Acheampong is the chairman of Adesewase Bank and currently the Chief Executive
Officer. Abigail has a domineering character is unsure if they may need additional
committees apart from the audit committee, as setting up more sub board committees
becomes unnecessary financial burden on the Bank
The shareholders are Institutional shareholders and other individual shareholders (numbering
over 500) and due to their large numbers and other considerations, the directors believe that it
is impractical and too costly to hold an annual general meeting of shareholders. Instead, the
board has suggested sending out the financial statements and any voting resolutions by email
for shareholders to vote on the resolutions via email.
Required:
In respect of the corporate governance of Adesewase Banking Limited:
i) Identify and explain Five (5) corporate governance weaknesses; and
ii) Provide a recommendation to address each weakness.

b) In a company, the internal auditor has carried out an audit of accounts receivable at the
balance sheet date. His test included a debtors’ circularisation, a review of payments after
date, an analysis of the systems of internal control and arithmetic check on the balances. In
these circumstances to what extent would the external auditor be justified in not undertaking
any audit test in this area in the course of his own audit

QUESTION FOUR
The auditors of Santasi Ltd issued an adverse opinion on the financial statements of the
company for the year ended 31 December 2019. This was due to the fact that management
could not make available the cash book, general ledger and debtors ledger to the auditors for
examination.
Some of the engagement team members may not agree to the issue of an adverse opinion and
are suggesting an unmodified report with an emphasis of matter paragraph.

a) Comment on the action of the auditors to issue an adverse opinion. (10marks)
b) In November, 2018, the head office of BDE Company Ltd was damaged by a fire. Many
of the company's accounting records were destroyed before the audit for the year ended 31st
December, 2018 took place.
The company's financial accountant has prepared financial statements for the year ended 31st
December, 2018 on the basis of estimates and the information he has been able to salvage.
You have completed the audit of these financial statements.
Required:
Draft the 'basis of opinion' and 'opinion' paragraphs of the auditors' report which you would
issue on the financial statements of BDE Company Ltd for the year ended 31 December,
2018.

Please I need help on the above questions.To be submitted tomorrow at 8:00am

Question 1-24 are objectives

SECTION A
Each question is followed by options lettered A to D. Find out the correct option for each
question. Give only one answer to each question. Each question carries one mark.
You are about to issue the auditor’s report for Ayewaso Company Ltd, a listed client.
Half way through the year the company suffered a major computer systems failure
which destroyed the accounting records for the year to date. Backups have not been
kept so the company has had to reconstruct the figures for the first six months.
1. Which opinions are most appropriate for Ayewaso Company Ltd?
A. Qualified or adverse
B. Unmodified or adverse
C. Unmodified or disclaimer
D. Qualified or disclaimer

2. What is the purpose of the Basis of Opinion paragraph in an auditor’s report
which contains an unmodified opinion?
A. To state the opinion on the financial statements
B. To confirm the audit has been conducted in accordance with ISAs and ethical
requirements
C. To highlight a material uncertainty relating to going concern which has been
adequately disclosed
D. To highlight management responsibilities to the users of the financial statements

3. Which of the following shows the correct order of the elements to be included in
the auditor’s report of Ayewaso Company Ltd?
A. Opinion, date, auditors address, signature
B. Title, opinion, signature, key audit matters
C. Addressee, opinion, auditor’s responsibilities, date
D. Responsibilities of management, basis for opinion, date, addressee

4. Which of the following describe the wording of a disclaimer of opinion?
A. The financial statements give a true and fair view
B. The financial statements do not give a true and fair view
C. The auditor does not express an opinion on the financial statements
D. Except for the matter described, the financial statements give a true and fair view

5. Which of the following could NEVER be the responsibility of an internal
auditor?
A. Risk management
B. Organizational control
C. Corporate governance
D. Audit report to shareholders

You are about to issue the auditor’s report for two listed clients, Kejetia Co and Kwadaso Co.
The financial statements show the following:
Kejetia Kwadaso
GH¢’000 GH¢’000
Profit before tax 10 245
Total assets 2,300 6,500
Uncorrected Misstatements:
Overstatement of receivables due to an
Irrecoverable debt not being written off 15
Overstatement of inventory due to failure to
Value at lower of cost and NRV 85

NB:The ghc15 is for Kejetia and the ghc85 is for Kwadaso

6. Which of the following is the most appropriate opinion for Kejetia Co?
A. Adverse
B. Disclaimer
C. Qualified
D. Unmodified

7. Which of the following is the most appropriate opinion for Kwadaso Co?
A. Adverse
B. Disclaimer
C. Qualified
D. Unmodified

8. How would your answer change for Kwadaso Co if the misstatement of
inventory had been GH¢10,000 instead of GH¢85,000?
A. Adverse opinion.
B. Unmodified opinion with emphasis of matter
C. Qualified opinion
D. Unmodified opinion

9. You have identified material uncertainties relating to going concern during your
audit of Kejetia Co. these have been adequately disclosed by management. How
will this impact the auditor’s report?
A. The report should include a section titled ‘Emphasis of Matter’ which will refer to
the management’s disclosure note
B. The report should include a section titled Material Uncertainty Related to Going
Concern’ which will refer to the management’s disclosure note
C. The report should include a section titled ‘Going Concern issues’ which will refer
to the management’s disclosure note
D. As management have adequately disclosed the uncertainties relating to going
concern, the auditor does not need to modify the reports as the financial
statements include the appropriate information

10. Which of the following statements is true?
A. Random sampling is a method where the auditor picks the sample with no
particular pattern
B. Deviation must be extrapolated to determine the effects on the population
C. Block sampling is where the auditor tests all items in a population
D. Monetary unit sampling is a statistical method of sampling

11. Which of the following constitutes sampling?
A. Where less than 100% of the items in a population are tested and have an equal
chance of selection
B. Where less than 100% of the items in a population are tested and have a chance of
selection
C. Where items within a population with certain characterises are chosen for testing
D. Where every nth item in a population are chosen for testing

12. Which of the following statement is true?
A. Statistical sampling methods are more reliable than non- statistical methods
B. The auditor must always use stratification to ensure a representative sample is
tested.
C. More than one sampling method may be used to test one population
D. A deviation occurred when a result differs from expectation during a substantive
procedure

13. Which of the following would you NOT expect to see in a current file?
A. Bank reconciliation
B. Inventory count details
C. Engagement letter
D. Replies from customers relating to a circularisation

14. The objective and scope of the internal audit function vary wide and depend on
the structure and size of the entity plus the requirement of management. Which
TWO of the following functions could internal audit perform and still operate
effectively?
A. Examining financial and operational information for management
B. Reviewing accounting system and related controls
C. Approving annual budgets
D. Preparing reconciliations between the receivable’s ledger control account and
receivables ledger

15. Which of the following does NOT belong in the auditor’s report?
A. Auditor’s address
B. Basis of the opinion
C. Involvement of any specialist
D. Statement of responsibilities of auditors

16. The audit committee should be comprised of?
A. An equal number of directors and shareholders representatives subject to a
maximum of ten members
B. An equal number of directors and shareholders representatives subject to a
maximum of six members
C. directors and shareholders representatives with directors forming the majority
D. directors and shareholders representatives with shareholders representatives
forming the majority

17. What is meant by the expression ‘expectation gap’?
A. The gap between how the director of the company perform their duties and how
shareholders expect them to perform
B. The gap between how the director of the company perform their duties and how
the general public expects them to perform
C. The gap between the public perception of the role of company auditors and their
statutory role and responsibilities
D. The gap between the auditor’s own perception of their duties and how they are set
out in the Companies Act.

18. The auditor is required to?
A. Accumulate all material misstatements found during the audit, unless they are
immaterial
B. Communicate to the credit controller the effect that uncorrected misstatement may
have on the auditor’s report
C. Reassess materiality after evaluating the effect of uncorrected misstatements
D. Accumulate all material misstatements found during the audit, unless they are
clearly trivial

19. Value for money audit does NOT involve
A. Effectiveness
B. Extension
C. Efficiency
D. Economy

20. Which of the following process is NOT a process normally reviewed by an
operational internal audit assignment?
A. Procurement
B. Marketing
C. External audit
D. Human resources

SECTION B (20marks)
Answer all the questions in this section. The section contains two parts. The first part
contains statements that are either true or false. You should indicate your answer by
writing ‘A’ if a statement is true or ‘B’ if a statement is false. The second part requires you
to answer questions from a case/scenario .
PART ONE
Answer all questions in this part. Each question carries one (1/2) mark.
Regarding the reasons for preparing audit documentation, select whether each of the
following statements are true or false.
21. To retain a record of matters of continuing significance to future audits
A. True
B. False

22. To provide evidence of audit work carried out in the event of a legal dispute
A. True
B. False

23. To enable an experienced auditor to carry out quality control reviews
A. True
B. False

You are currently performing subsequent event procedures for the audit of Onipa Nua
Company. From a review of the board minutes you identifying that a customer is suing the
company for an injury they suffered on the client’s premises on February 5 2010. The client’s
year-end is 31 January 2010. The directors are proposing to amend the financial statements to
include a provision for the amount of compensation they expect to have to pay to the
customer. Legal advice received indicates that the claim is possible to succeed
Which of the following statements is true with regard to subsequent events?
True False

24. The auditor must perform audit procedures to identify events
occurring after the date of the financial statements up to the
date the auditor’s report is signed that could have an effect on
the financial statements

25 The auditor has no responsibility after the auditor’s report has
been singed, even if they become aware of events occurring
which means the opinion s is now incorrect

26 The auditor does not need to consider any events which occur
after the date of financial statements as it is outside of the
reporting period

27 The auditor only needs to consider subsequent events
communicated to them by the directors
Which of the following statements is true in respect of adjusting events?
True False

28 Adjusting events are those events which occur before the
auditor’s report have been signed

29 Adjusting events are those which occur after the year -end
date

30 Adjusting events are those which occur after the year-end
date and provides evidence of a condition existing at the yearend date

31 Adjusting events require disclosure in the notes to the
financial statements

32 Events after the reporting period may be adjusting or nonadjusting
In respect of the customer’s claim, which of the following statements is true?
True False

33 If the claim was probable rather than possible, a provision
should be recognized in the financial statements dated 31
January 2010

34 The injury was caused after the year-end therefore was not a
condition in existence at the year-end

35 The injury was caused after the year-end therefor has no
impact on the financial statements being audited

36 The claim is an adjusting event and the financial statements
should reflect the claim

Identify whether the following statements are true or false
True False

37 Internal audit reports must be produced in a standardised
format as set out by the financial reporting framework

38 Internal audit reports are issued to shareholders

39 There is no legal requirement for companies to have an
internal audit department

40 The presence of an internal audit function may act as a
deterrent for fraud

PART TWO
Answer all questions in this part. This part requires you to read the case/scenario carefully
and answer the questions that follow. This question carries10 marks.

(a) Define 'tests of control' and explain the importance of tests of control in the audit of a
company.


(b) You are an audit senior in Asenso Boateng & Co a firm providing audit and assurance
services. One of your clients is an exclusive hotel called 'Rock City Hotel' situated in the
centre of Airport City Accra. As part of your audit procedures you are assessing the controls
surrounding payroll. You have read last year's audit file and have obtained the following
information:
The hotel employs both full and part time staff. Due to the nature of the business most of
the work is done in shifts. All staff are paid on a monthly basis.
New members of staff are given an electronic photo identification card on the day they join
by the personnel department. This card is used to 'clock in' and 'clock out' at the start and
end of the shift to record the hours worked.
At the end of each week the information recorded on the system is sent automatically to
the payroll department and also to the head of each of the three main operating divisions:
Rooms, Food & Beverage and Corporate Events. Each division head must reply back to the
payroll department by email to authorise the hours worked by their staff.
The payroll clerk collates all the authorised information and then inputs the hours worked
into a standardised computerised payroll package. This system is password protected using
an alphanumerical password that is only known to the payroll clerk and the finance
manager.
Once the hours have been entered, the calculation of the gross pay and taxation are
calculated automatically along with any other statutory deductions. At the end of the
calculations a payroll report is produced and printed. The finance manager reviews the
report and compares the data to last month to identify and follow up any unusual variances.
When he is satisfied with the information, he authorises the payroll run by signing the
payroll report and the payroll clerk submits the data.
Payslips are sent to the home address of each employee and payment is made by bank
transfer.

Required:
With reference to the scenario:
(i) Identify and explain FOUR STRENGTHS within the hotel's internal control system in
respect of payroll.

(ii) For each of the identified strengths, state a test of control the auditor could perform to
assess if the controls are operating

SECTION C
Answer ‘question one’ and any other two. All questions carry equal marks (20 marks
each).
QUESTION ONE
(a) You are the audit manager in charge of the audit of Die Hard Company Limited, a
company that has been trading for 20 years selling Computers and its accessories directly to
the public and has recently become a listed company. The company’s year-end is 31
December.
Current liabilities are shown on Die Hard Co's statement of financial position as follows:
Trade payables GHC884,824 GHC816,817
Accruals 56,903 51 ,551
Totals 1,001,727 868,368

Required:
List the substantive audit procedures that you should undertake in the audit of current
liabilities of Die Hard Co for the year ended 31 December 2018. For each procedure, explain
the purpose of that procedure.

Please from Q1-Q20 are multiple choice questions and from Q21-Q40 are true or false statements.

Answer 1

Part One :

Question 1:

Option D. Qualified or disclaimer

As there is no Information regarding the first six months. The auditor can't obtain evidence. Auditor should give Qualified or disclaimer of opinion.

Question 2:

Option B. To confirm the audit has been conducted in accordance with ISAs and ethical
requirements

The Basis of opinion para confirms that the audit has been conducted in accordance with the standards & have obtained sufficient & appropriate Audit evidence to express the opinion.

Question 3:

Option C. Addressee, opinion, auditor’s responsibilities, date

The correct order is Title, Addressee, Opinion, Basis of opinion, management's Responsibilities , Auditor's Responsibility , Management's Responsibility, Signature, place & date.

Question 4:

Option C. The auditor does not express an opinion on the financial statements

Disclaimer of opinion means that the auditor is unable to obtain the information in order to express an opinion.

Question 5:

Option D. Audit report to shareholders

Internal Auditor gives audit report to the management but not to the shareholders.

Question 6:

Option C. Qualified

The misstatements when aggregated become material. So, the auditor should provide Qualified Opinion.