- 10 Marks
AA – May 2018 – L2 – Q1a – Introduction to Audit and Assurance Engagements
Explains the concept of reasonable assurance and its advantages while addressing the role of auditors in assessing the integrity of a finance manager.
Question
The Finance Manager of Nkran Ltd prepared a comprehensive cash flow forecast for the purpose of securing a loan from the bank. This was presented to the bank for evaluation and approval. The bank, after evaluating the cash flow forecast, wrote to Nkran Ltd requesting a reasonable assurance report. The Managing Director of Nkran Ltd, who was impressed with the Finance Manager’s cash flow forecast, is now questioning the integrity of the Finance Manager to the extent of considering dismissing him. The Managing Director decided to consult you, the Auditor, before taking the decision.
i) Write a letter explaining the need for reasonable assurance and its advantages to Nkran Ltd and the elements of an assurance engagement. (8 marks)
ii) Advise the Managing Director on whether his intended decision is well-founded. (2 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Assurance report, Auditor's advice, Bank Loan, Engagement elements, Reasonable Assurance
- Level: Level 2
- Topic: Introduction to Audit and Assurance Engagements
- Series: MAY 2018