Topic: Planning and Approach for Audit and Assurance Engagements

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AA – Nov 2024 – L2 – Q5a – Tests of Control and Methods for Testing Controls

Explain two tests of control and their corresponding methods of testing.

Question

Oboshie Audit Firm has been engaged to audit the financial statements of Abakah Manufacturing LTD for the year ended December 31, 2023. During the planning phase of the audit, the audit team identified that Abakah Manufacturing LTD relies heavily on its internal control system to ensure the accuracy and completeness of its financial reporting.

Required:
i) Explain TWO tests of control to be performed by Oboshie Audit Firm to evaluate the effectiveness of Abakah Manufacturing LTD’s internal controls over its financial reporting.

ii) Identify a method that should be used under each test of control in (i) above.

Answer

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Tags: Approval of Transactions, Audit Procedures, Control Testing, Internal Controls, Risk Assessment, Segregation of Duties
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: Nov 2024

AA – July 2023 – L2 – Q4a – Completion Procedures and Reporting, Planning and Approach for Audit and Assurance Engagements

Explanation of going concern indicators for Kitchenhub Ltd and the stages when analytical procedures can be used.

Question

a) You are an Audit Assistant of Abinchi & Associate and your firm is planning the audit of a client. You have been provided with draft financial statements extracts and the following information is about your client, Kitchenhub Ltd, who is a kitchen equipment manufacturer. The company’s year-end is 30 April 2022.

Kitchenhub Ltd has recently been experiencing trading difficulties, as its major customer who owes GH¢0.6 million to Kitchenhub Ltd has ceased trading, and it is unlikely any of this will be received. However, the balance is included in the financial statements extracts below. The sales director has recently left Kitchenhub Ltd and is yet to be replaced.

The monthly cash flow has shown a net cash outflow for the last two months of the financial year and is forecast as negative for the forthcoming financial year. As a result of this, the company is unable to settle suppliers whose payments are due, and some are threatening legal action to recover the sums owing.

Due to its financial difficulties, Kitchenhub Ltd defaulted on a loan repayment, and as a result of this breach in the loan contract, the bank has asked that the loan of GH¢4.8 million be repaid in full within six months. In view of this, the directors have decided not to pay dividends for the period.

Below is the Financial Statement extract for Kitchenhub Ltd for the year ended 30 April:

	Draft 2022 (GH¢)	Actual 2021 (GH¢)
Current assets
Inventory	3.4	1.6
Receivables	1.4	2.2
Cash	–	1.2
Current liabilities
Trade payables	1.9	0.9
Overdraft	0.8	–
Loans	4.8	0.2

Required:
i) Explain SEVEN (7) factors that indicate that Kitchenhub Ltd may not be operating as a going concern entity. (7 marks)
ii) Identify THREE (3) stages of an audit when analytical procedures can be used by Abinchi & Associate. (3 marks)

Answer

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Tags: Analytical procedures, Audit Planning, Financial difficulties, Going Concern
Level: Level 2

Topic: Completion Procedures and Reporting, Planning and Approach for Audit and Assurance Engagements
Series: JULY 2023

AA – Nov 2023 – L2 – Q1c – Planning and Approach for Audit and Assurance Engagements

Explain five benefits of planning an audit as per ISA 300.

Question

ISA 300: Planning an audit of financial statements provides guidance to assist Auditors in planning an audit.

Required:
Explain FIVE (5) benefits of audit planning.
(5 marks)

Answer

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Tags: Audit Planning, Audit strategy, Benefits, ISA 300, Risk Assessment
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: NOV 2023

AA – Nov 2023 – L2 – Q1b – Planning and Approach for Audit and Assurance Engagements

Identify and explain five risks that should be considered when planning an audit for Akanji Ltd.

Question

Your firm has been appointed as Auditor for Akanji Ltd for the year ended 31 December 2022. Akanji Ltd designs, manufactures, and retails traditional fabrics. In trying to understand Akanji Ltd’s business, you observed the following:

Inventory is held at the warehouse and at retail shops in three different locations.
Customers place orders online and review the designs before sales are made.
There was a sharp fall in revenue due to the influx of “pirated fabric” and the directors are uncertain whether this trend will stop.
One retail shop was closed during the year and the premises are still available for sale.
The Internal Auditor was dismissed in the course of the year and is pursuing a claim for unfair dismissal. The Finance Director currently doubles as the Internal Auditor.
The Managing Director is due to retire next year and is likely to request repayment of loans he advanced to the business. Negotiations with the bank in respect of a loan to repay the Managing Director have started.

Required:
Identify and explain FIVE (5) risks arising from the above that should be considered when planning the audit of Akanji Ltd.
(10 marks)

Answer

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Tags: Audit Planning, Audit risks, Business Planning, Corporate Governance, Internal Controls
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: NOV 2023

AA – Nov 2019 – L2 – Q5a – Planning and Approach for Audit and Assurance Engagements

Discusses the main actions to establish preconditions for an audit and outlines conditions for changing audit engagement terms.

Question

You have been assigned as the training manager in your audit firm. The Partners of your firm tasked you to take the newly recruited trainees through ISA 210: Agreeing the Terms of Audit Engagement. This deals with the auditor’s responsibilities in agreeing the terms of the audit engagement with management and those charged with governance.

The ISA states that the auditor shall agree to the terms of the audit engagement with management or those charged with governance, as appropriate, and these terms can be recorded in an audit engagement letter or other suitable form of written agreement.

Required:
i) Describe the main actions an auditor should take in order to establish whether the preconditions for an audit are present. (6 marks)
ii) Outline when an auditor should change the terms of the audit engagement in relation to a recurring audit.

(4 marks)

Answer

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Tags: Audit Engagement, ISA 210, Preconditions, Recurring Audits, Terms of Engagement
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: NOV 2019

AA – Nov 2019 – L2 – Q1b – Planning and Approach for Audit and Assurance Engagements

Explaining the difference between audit strategy and audit plan, along with identifying the contents of both.

Question

ISA 200: Overall Objectives of Independent Auditor and the Conduct of an Audit and ISA 300 – Planning an Audit of Financial Statements requires that auditors should plan in order to conduct the audit in an effective, efficient, and timely manner. The plan should include an overall audit strategy and a detailed audit plan.

Required:
i) Distinguish between audit strategy and audit plan. (5 marks)
ii) Identify the contents of audit strategy and audit plan. (10 marks)

Answer

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Tags: Audit Engagement, Audit Plan, Audit strategy, ISA 200, ISA 300, Planning
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: NOV 2019

AA – Mar 2023 – L2 – Q1c – Planning and Approach for Audit and Assurance Engagements

Explain the concept of audit planning and enumerate its benefits in conducting audit engagements.

Question

Preparing an audit plan is the first stage in conducting an audit engagement. It has become necessary for audit firms to plan their audit engagements to avoid risks and other litigation issues. ISA 300: Planning an Audit of Financial Statements emphasizes the importance of audit planning in ensuring an effective audit.

Required:
i) Explain audit planning. (3 marks)
ii) Enumerate FOUR (4) benefits or importance of audit planning. (6 marks)

Answer

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Tags: Audit Planning, Benefits of Planning, ISA 300
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: MAR 2023

AA – Mar 2023 – L2 – Q1a – Planning and Approach for Audit and Assurance Engagements

Explain the advantages and audit procedures of conducting an interim audit.

Question

Kosobi Insurance Company Ltd (KICL) prepares its annual financial statements to 31 December each year. Due to the magnitude of transactions, interim financial statements are prepared each year and subjected to an interim audit. This is done to facilitate early completion of the final audit of the annual financial statements. The finance and accounts team of KICL consider this to be more work and unwarranted.

You are the Audit Senior and head of the audit team carrying out the audit field work on KICL. As part of your exit meeting with management of KICL, you intend to justify the need for an interim audit.

i) State THREE (3) advantages in conducting Interim Audit.
ii) Identify TWO (2) audit procedures in conducting Interim Audit.

Answer

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Tags: Audit Advantages, Audit Procedures, Early Completion of Audit, Interim Audit
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: MAR 2023

AA – Nov 2020 – L2 – Q2b – Planning and Approach for Audit and Assurance Engagements

Explain key items to include in an audit strategy document.

Question

ISA 300: Planning an audit of financial statements requires auditors to establish the overall strategy for an audit. An auditor is required to plan the audit by developing an audit strategy to guide the plan itself. Audit planning is necessary for a number of reasons, the foremost of which is to achieve audit efficiency and effectiveness. Audit planning involves risk assessment procedures, further audit procedures, and other audit procedures to obtain sufficient appropriate audit evidence. During the audit, if an auditor concludes that the initial plan requires alteration, the auditor shall consider revising the audit strategy.

Required:
Explain with justification FOUR (4) key items that should be included in an audit strategy document.
(4 marks)

Answer

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Tags: Audit Documentation, Audit Planning, Audit strategy, ISA 300, Risk Assessment
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: NOV 2020

AA – Nov 2020 – L2 – Q1b – Planning and Approach for Audit and Assurance Engagements

State benefits of audit planning and explain what an auditor should do to secure them.

Question

Audit planning is a vital area of the audit primarily conducted at the beginning of an audit process to ensure that appropriate attention is devoted to important areas, potential risks are promptly identified, work is completed expeditiously, and work is properly coordinated.

Required:
i) State FIVE (5) benefits of audit planning.
(5 marks)

ii) Explain what an auditor should do to secure the benefits.
(10 marks)

Answer

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Tags: Audit Coordination, Audit Planning, Auditor's Actions, Benefits of Planning, Risk Identification

Topic: Planning and Approach for Audit and Assurance Engagements
Series: NOV 2020

AA – Nov 2024 – L2 – Q5a – Tests of Control and Methods for Testing Controls

Explain two tests of control and their corresponding methods of testing.

Question

Required:
i) Explain TWO tests of control to be performed by Oboshie Audit Firm to evaluate the effectiveness of Abakah Manufacturing LTD’s internal controls over its financial reporting.

ii) Identify a method that should be used under each test of control in (i) above.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Approval of Transactions, Audit Procedures, Control Testing, Internal Controls, Risk Assessment, Segregation of Duties
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: Nov 2024

AA – July 2023 – L2 – Q4a – Completion Procedures and Reporting, Planning and Approach for Audit and Assurance Engagements

Explanation of going concern indicators for Kitchenhub Ltd and the stages when analytical procedures can be used.

Question

Below is the Financial Statement extract for Kitchenhub Ltd for the year ended 30 April:

	Draft 2022 (GH¢)	Actual 2021 (GH¢)
Current assets
Inventory	3.4	1.6
Receivables	1.4	2.2
Cash	–	1.2
Current liabilities
Trade payables	1.9	0.9
Overdraft	0.8	–
Loans	4.8	0.2

Answer

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Tags: Analytical procedures, Audit Planning, Financial difficulties, Going Concern
Level: Level 2

Topic: Completion Procedures and Reporting, Planning and Approach for Audit and Assurance Engagements
Series: JULY 2023

AA – Nov 2023 – L2 – Q1c – Planning and Approach for Audit and Assurance Engagements

Explain five benefits of planning an audit as per ISA 300.

Question

ISA 300: Planning an audit of financial statements provides guidance to assist Auditors in planning an audit.

Required:
Explain FIVE (5) benefits of audit planning.
(5 marks)

Answer

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Tags: Audit Planning, Audit strategy, Benefits, ISA 300, Risk Assessment
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: NOV 2023

AA – Nov 2023 – L2 – Q1b – Planning and Approach for Audit and Assurance Engagements

Identify and explain five risks that should be considered when planning an audit for Akanji Ltd.

Question

Inventory is held at the warehouse and at retail shops in three different locations.
Customers place orders online and review the designs before sales are made.
There was a sharp fall in revenue due to the influx of “pirated fabric” and the directors are uncertain whether this trend will stop.
One retail shop was closed during the year and the premises are still available for sale.
The Internal Auditor was dismissed in the course of the year and is pursuing a claim for unfair dismissal. The Finance Director currently doubles as the Internal Auditor.
The Managing Director is due to retire next year and is likely to request repayment of loans he advanced to the business. Negotiations with the bank in respect of a loan to repay the Managing Director have started.

Required:
Identify and explain FIVE (5) risks arising from the above that should be considered when planning the audit of Akanji Ltd.
(10 marks)

Answer

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Tags: Audit Planning, Audit risks, Business Planning, Corporate Governance, Internal Controls
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: NOV 2023

AA – Nov 2019 – L2 – Q5a – Planning and Approach for Audit and Assurance Engagements

Discusses the main actions to establish preconditions for an audit and outlines conditions for changing audit engagement terms.

Question

(4 marks)

Answer

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Tags: Audit Engagement, ISA 210, Preconditions, Recurring Audits, Terms of Engagement
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: NOV 2019

AA – Nov 2019 – L2 – Q1b – Planning and Approach for Audit and Assurance Engagements

Explaining the difference between audit strategy and audit plan, along with identifying the contents of both.

Question

Required:
i) Distinguish between audit strategy and audit plan. (5 marks)
ii) Identify the contents of audit strategy and audit plan. (10 marks)

Answer

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Tags: Audit Engagement, Audit Plan, Audit strategy, ISA 200, ISA 300, Planning
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: NOV 2019

AA – Mar 2023 – L2 – Q1c – Planning and Approach for Audit and Assurance Engagements

Explain the concept of audit planning and enumerate its benefits in conducting audit engagements.

Question

Required:
i) Explain audit planning. (3 marks)
ii) Enumerate FOUR (4) benefits or importance of audit planning. (6 marks)

Answer

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Tags: Audit Planning, Benefits of Planning, ISA 300
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: MAR 2023

AA – Mar 2023 – L2 – Q1a – Planning and Approach for Audit and Assurance Engagements

Explain the advantages and audit procedures of conducting an interim audit.

Question

i) State THREE (3) advantages in conducting Interim Audit.
ii) Identify TWO (2) audit procedures in conducting Interim Audit.

Answer

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Tags: Audit Advantages, Audit Procedures, Early Completion of Audit, Interim Audit
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: MAR 2023

AA – Nov 2020 – L2 – Q2b – Planning and Approach for Audit and Assurance Engagements

Explain key items to include in an audit strategy document.

Question

Required:
Explain with justification FOUR (4) key items that should be included in an audit strategy document.
(4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Documentation, Audit Planning, Audit strategy, ISA 300, Risk Assessment
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: NOV 2020

AA – Nov 2020 – L2 – Q1b – Planning and Approach for Audit and Assurance Engagements

State benefits of audit planning and explain what an auditor should do to secure them.

Question

Required:
i) State FIVE (5) benefits of audit planning.
(5 marks)

ii) Explain what an auditor should do to secure the benefits.
(10 marks)

Answer

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Tags: Audit Coordination, Audit Planning, Auditor's Actions, Benefits of Planning, Risk Identification