icaew assurance notes icab kl

8/10/2019 Icaew Assurance Notes Icab Kl

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Chapter 1

Concept of and need for assurance

1. ICAB is a member of IFAC.

Ans: True False.

2. Who the users are will depend on the nature of the subject matter?

Ans: True False.

3. The e! e"ample of an assurance en#a#ement in Ban#ladesh is a standard audit.

Ans: True False.

4. What is the definition of assurance en#a#ement accordin# to IFAC?

Ans: Assurance $n#a#ement% An assurance engagement is one in which a practitioner expresses aconclusion designed to enhance the degree of confidence of the intended users other than theresponsible party about the outcome of the evaluation or measurement of a subject matter againstcriteria.

5. What is subject matter? What are the cate#ories of it?

Ans: Subject Matter: which is evaluated. g: computer system.

6. What are the benefits of an assurance en#a#ement?

Ans: ! "ndependent# $rofessional opinion.! %onfidence to others.! &eterrent to fraud.

! Attention to deficiency.

! "nvestors faith.

7. Which of the followin# are speciali&ed audit?

Ans: 'ranch audit "nternal audit Fraud investigations 'an( audit

$ension scheme audit

8. Which le'el of assurance en#a#ement #i'es the followin# opinion% (In the course of m!see in# e'idence about the statement b! the chairman) nothin# has come to m! attentionindicatin# that the statement is not reasonable.*

Ans: )imited assurance.

9. +efine e"pectations #ap. ,ow can !ou reduce e"pectations #ap?

Ans: xpectations gap : )ac( of understanding of users.

*educe by : %learly indicating scope + limitations.

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10. What constitutes e"pectations #ap? $"plain wh!?

Ans: )ac( of understanding.

*easons : i. ,ot aware of limitations.ii. %onsidering as guarantee.

11. What purpose is ser'ed b! spellin# out clearl!) the scope and limitations of an assuranceen#a#ement in the en#a#ement letter?

Ans: xpectation gap is reduced.

12. What is the e! benefit and limitation of assurance?

Ans: 'enefit : "ndependent# $rofessional verification.

)imitation : *is( of wrong conclusion.

13. What ris is associated with the limitations of assurance en#a#ement?

Ans: To draw wrong conclusion.

14. Which of the followin# factor ma e a person ineli#ible for bein# a compan! auditor?

Ans: An employee of the client company.

A shareholder of -.- / of the subscribed capital.A person who is indebted to the company not exceeding T(. 0---.

&irector of 1 )td. which is the managing agent of the client.

15. +efine reasonable and limited assurance. Compare and contrast between reasonable andlimited assurance.

Ans: *easonable assurance 2 A very high but not absolute level of assurance.

)imited assurance 2 )ow level assurance.

'oth the assurance engagement and gives a conclusion.

-o. Characteristics easonable Assurance /imited Assurance

0. )evel of assurance 3igh )ow

4. vidence Sufficient + appropriate )imited

5. 6pinion $ositive ,egative

Chapter02rocess of assurance% 2lannin# the assi#nment

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1. What is audit strate#!? What is audit plan? +ifferentiate.Ans: Audit strategy 7 Sets the scope# training + direction 2 &evelopment of audit plan Audit plan 2 Sets out nature timing + extent

- To obtain sufficient# appropriate evidence

&ifference%haracteristics Audit strategy Audit $lan

,ature 8eneral Specific6utcome Audit $lan Audit $rocedures

3. What proposes are ser'ed b! an audit plan?Ans: 0. Attention to important areas 4. "dentify potential problems and resolve 5. nsure properly organi9ed audit . Assign wor( to team members . &irection + supervision ;. *eview wor(

. 4ention the structure of plannin#Ans: 0. thical re


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9. "nteractive E 0# $. 5

:. ;nder B. ,ow can !ou achie'e an understandin# of the entit!?Ans: 0. "n "ndustry information 7 *atio of sales to trade receivables.

4. *elationship between:a> FS elements 7 *elation of gross profit to sales

b> Financial information and non2financial information $ayroll cost to no. of employees.

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17. Ghat is the basis for choosing analytical procedures for auditHAns: Auditors professional judgment.19. At the ris( assessment stage# what are the possible sources of information about theclientHAns: 0."nternal financial information

4. 'udgets 5. Management accounts . ,on2 financial information . 'an( and %ash records ;. Iat returns B. 'oard minutes C. &iscussion of the correspondents with the client at the year end.1:. "nteractive E 5. $. 41=. Ghat is materialityHAns: )evel of error that affects the decision of the users.3>. Ghat does materiality depends onHAns: Si9e of the error.31. According to the 'SA54-# when should an auditor consider materialityHAns: 0. &etermining nature# training + extent of audit procedure. 4. valuating effect of misstatement33. 3ow does materiality assessment help the in decision ma(ingHAns: "t helps to decide:

0. 3ow many and what items to examine4. Ghether to use sampling techni "nherent ris( b> %ontrol ris(

4.*is( of failing to detect material misstatement &epends on auditor

3:. Ghat is internal ris( and control ris(H &ifferentiat.Ans: "nherent ris(: $ossibility of material misstatement

&ue to nature of the items ,o. of related internal control

%ontrol *is(: $ossibility of not preventing or correcting a materialmisstatement.

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&ue to accounting system &ue to internal control system

&ifference: "nherent ris( %ontrol ris(

0. &ue to items nature 0.&ue to internal control ris(4. ,o internal control related 4."nternal control related

3=. 8ive some example that might increase inherent ris(.0. 'alance includes estimates4. 'alance is important5. Financial statements

%ompany in trouble %ompany to raise finance &irectors? motive 7 eg. $rofit target bonus

. FS contains complex accounting

. "ndustry in which it operates;. *egulations it falls under.

>. &efine detection ris(. Ghich part of audit ris( could be controlled by the auditorH 3owHAns: $ossibility of not detecting a misstatement.

"ndividually or aggregated "t is in the control of auditor

&etection ris( could be controlled by the auditor 'ecause:

"nherent and control ris( are integral to client Auditor?s part is detection ris(

Auditor?s aim is to reduce overall audit ris(# not only one part.1. %ould detection ris( be entirely eliminatedH GhyH

Ans: ,o. &ue to inherent limitations of audit.3. 3ow can detection be reducedH

Ans: 'y carrying out substantial number of losts. "nclude high level of audit wor(

. "f control ris( + inherent ris( both are high what effect it has on the auditHAns:

,ot rely on the tests of controls. %arry out extended test of details

To reduce detection ris( 5. &etermine the audit ris( would you accept the engagementH"nherent ris( %ontrol ris( &etection ris( Audit ris(

3igh 3igh 3igh HMedium )ow Medium H

Ans:0. Audit ris( K 3igh. ,ot acceptable

*educe detection ris( to low level4. Audit ris( K medium. Acceptable

6. "f control ris( is low# would you substantive procedureHAns: ,o. 'ecause auditor has to reduce detection ris(.

7. See wor(ed example E 0# 4 $. B.

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9. "nteractive E : Audit ris(. $. B:. Ghat are the steps to identify and assess ris(H

Ans: Step 0: "dentify ris( at understanding entity level. 6bsolete inventing

Step 4: identify ris( at assertion level. g. &irectors asserted# "nventory is xxx.

Step5: Magnitude of misstatement "nventory is material for a mfc

Step : )i(elihood of misstatement *egular review# scrapping# resale of inventory.

=. "nteractive E ;. $. D5>. According to 'SA 50 # which factor indicate a significant ris(HAns: 0.*is( of fraud

4.*ecent development conomic# accounting

5.%omplexity of transaction.Significant transaction with a related party.&egree of subjectivity in the financial information

;. nusual transaction.51. Ghy do unusual transaction are more li(ely to give rise to material misstatement thanroutine and regular transactionsHAns: 'ecause unusual transaction have more:

0. Management interventions4. Manual interventions5. %omplex accounting principles or calculations

. 6pportinity for 7 control procedure not followed.53. Ghat should an auditor do when found significant ris(HAns: Auditor must evaluate the design + implemention of entity?s control in that area.

Chapter05

2rocess of Assurance% $'idence and eportin#

1. What is Audit $'idence? What are the t!pes of Audit $'idence?

A,S : "nformation# on which audit opinion is based.


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4. Substance $rocedures2To test assertion level

Test specific balances

a> Test of details

b> Substantive analytical procedures.

3. Wh! do Auditors Carr! out test of control substanti'e procedures?

A-


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Written &ocuments than 6ral.

ri#inals 6riginal than facsimiles.

5. What is Financial


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ccurrence i#hts bli#ations 2 &isclosed one6ccurred 7 $ertained to entity.

Completeness All &isclosures included.

Classification ;nderstandabilit! Appropriately presented 7 clearly expressed.

Accurac! aluation &isclosed fairly 7 Appropriateaccounts.

6. Which test shall an Auditor perform to collect audit e'idence?

A-


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5. Adjustments

1>. What are the t!pes of substanti'e procedure? When these areappropriate to use?

A,S % 1. Anal!tical procedure

)arge volume of transactions

$redictable transactions. e.g. wages and salaries

3. Tests of detail

"nformation of account balances

Ierify assertions. e.g. "nventories# trade receivables.

11. Interacti'e @ 1) 2.95

13. Accordin# to B>) What are the contents of an Audit eport?

A-


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State of %ompany?s Affairs

$rofit or )oss

&irectors report consistent with FS.

15. What are the Implied pinions? Which matters are related b!e"ceptions?

A-< %$roper boo(s of Accounts in report of

a. Money received and expanded 7 Gith related matters.

b. Sales and particulars.

c. $articulars of Manufacturing %o. 7 e.g. $roduction#&istribution# Mar(eting# tili9ation of material# )abor.

16. Wh! does it need to eep uniformit! in the form and content of theaudit report?

A-


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e)g) #uditor pro,ide a(solute assurance

We can reduce those ( re*o,ing the *isunderstandings)

17. What are the contents of an assurance report?

#$%& -

1) .itle learl indicating its independence

2) #ddressee

3) %u( ect *atter

4) riteria

5) %ignificant inherent li*itation

6) estricting use of report

When criteria *ade a,aila(le to specific users)

7) esponsi(le part

art and practitioner s responsi(ilit

8) %# co*pliance

ngage*ent perfor*ed accordingl

9) Wor su**ar

n case of negati,e conclusion

10) onclusion

11) :ate

12) $a*e / address

18. Which issue is nor*all co,ered in the report to the*anage*ent of the client

#$%& nternal control "ea nesses)

19. nteracti,e ; 2< )79

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Chapter 6

Introduction to internal control

1. What is internal control? Wh! does an or#ani&ation need IC?

Ans% "nternal control: The process designed to achieve entity?s objectives.*easons : 1. Minimi9e business ris(

2. nsure effective functioning

3. nsure compliance with laws + regulations.

3. What are the limitations of internal controls ?

Ans% 1. xpensive May not be worth

2. 3uman element %ontrols implemented by human %an ma(e mista(es 'ad intention )ea( password

3. nusual transactions "c is for routine transactions Standards not fit to unusual transactions.

. Wh! small companies lac effecti'e internal controls?

Ans% 1. 3uman element

2.Fewer employees )ot of people ma(e large control chain. Fraud caught by next person.

3. Segregation of duties )ac(

5. What are the components of internal control s!stem?

Ans% 1. %ontrol environment Management functions

2. 'usiness ris( and entity?s ris( assessment process'usiness ris( inherent to operations*is( assessment process identifying business ris( to FS "mplement "%

3. "nformation system relevant to financial reporting objectives. *ecording procedures.

4. %ontrol Activities $olicies ensuring compliance of management directives.5. Monitoring %ontrols *eview + %orrective actions.

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'aineason

ontinue operation)


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6. What is audit committee? What are the terms of reference of an audit committee?

Ans% Subsection of '6& deals with finance and accounts.

Terms of reference:

1. *eview the integrity of FS2. *eview internal financial controls + ris( management systems.3. Monitor internal audit4. *ecommend about external auditor 5. Monitor independence of external auditor 6. "mplement policy on non 7 audit services by the external auditor.

@ey issue Financial statements.

7. What are the t!pes of control acti'ities?

Ans% 1.2.

$reventive&etective

Types :

1. Authori9ation g. Approval of documents # overtime2. $erformance review g. *econciliations.

%omparing internal data with external source. 8oods dispatched. Maintain control accounts and T'. T' brings all data together.

3. "nformation $rocessing Arithmetical accuracy. %hec( sum of invoices.

4. $hysical control %ompare cash inventory with accounting records. %ash count. )imit physical access to assets. "nventory store.

5. Segregation of duties ,umber of people involved in accounting process. &ifficult to occur fraud. + accidents. More %hec(ing

9. In what wa!s se#re#ation of duties could ta e place?

Ans% 1. Segregation of function Transaction carries out. *ecording.

Maintaining.2. Segregation of %arry out transaction Steps in transaction.3. Segregation of accounting operation Some staff should not operate.

:. What are that t!pes IT control 2rocedure?

Ans% 1. Application controls.2. 8eneral controls.

=. What is application control and #eneral control? +ifferential.

Ans% Application control Apply to individual application. nsure. Transaction occurred# authori9ed# complete# and accurate.

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#ll control acti,ities fall under these


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8eneral control Apply to Many applications. nsure. %ontinued proper operation of system. Supports application control.

+ifference Application control 8eneral control

=a> Scope "ndividual application Many application=b> %ontrol Support Transaction input Application control

1>. 8i'e some e"amples of #eneral controls.

Ans% 1. &evelopment of computer applications.2. $revention or detection of unauthori9ed %hanges to programs.3. Testing and documentation of programs changes.4. %ontrols to prevent wrong programs or files being used.5. %ontrol to prevent unauthori9ed amendments to data files.6. %ontrol to ensure continuity of operations.

11. In what situation) application control becomes useless?

Ans% Ghen general control is ineffective. So# review general control first.

13. 8i'e some e"ample of application control.

Ans% 1. %ontrol over input: %ompleteness.2. %ontrol over input: Accuracy3. %ontrol over input: Authori9ation4. %ontrol over processing.5. %ontrol over mater files and standing data.

1 . What controls should an auditor test about application controls?

Ans% 1. Manual controls manual input is complete# accurate.2. %ontrol over output System output using %A manual.3. $rogrammed control procedure sing %AAT.

15. Identif! application control 8eneral control.

Ans% See page no: D 2DB

16. What are the sauces of information about internal controls ?

Ans% 1. Manuals2. $olicies3. Minutes of meetings4. $rior year 5. "nterview Staffs6. 6bservation important

17. What are the documents used to record understandin# of entit!?

Ans% 1. ,arrative notes 8ood for short notes.

2. Luestionnaires %hec(list Aid memories Tic( boxes ,ever as(ed

3.&iagrams 'est for recording relationships# reporting linesTime consuming

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19. Interacti'e @ 1) 3) ) 2a#e% ==01>>

hapter-6e,enue % ste*

1) What are the e ris s associated "ith ordering

#ns)

#ccepting custo*ers "ith poor credit ris

$ot fulfilling orders)

2) What are the ris s associated "ith ordering

#ns) =rders *a (e ta en fro* custo*ers "ho are-

1) $ot a(le to pa

2) $ot pa long ti*e

3) =rders *a not recorded properl - not fulfilled- custo*ers lost

3) Which internal controls "ill *itigate the follo"ing ris s

1) =rders *a (e ta en fro* custo*ers "ho are $ot a(le to pa

2) =rders *a (e ta en fro* custo*ers "ho "ill $ot pa long ti*e

3) =rders *a not recorded properl

#ns)

%l$o)

is s ontrols

1 =rders *a (e ta en fro*custo*ers "ho are $ota(le to pa

2 =rders *a (e ta en fro*custo*ers "ho "ill $otpa long ti*e

3 =rders *a not recordedproperl - not fulfilled-custo*ers lost

4) What are the control o( ecti,es

1) >et custo*ers "ith good credit ris

2) ncourage pro*pt pa

3) ecord orders correctl

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4) ?ulfilled orders

5) What controls can *itigate the ris s of ordering

1) %egregation of duties redit control< in,oicing< dispatch

2) #uthorisation of credit ter*s

eference chec

#uthori@e ( senior

egular re,ie"

3) #uthorise change in custo*er data

#ddress change "ith letterhead

:eletion reAuest supported ( e,idence of (alance cleared

4) #ccept orders "ith no credit pro(le*s

5) %eAuential nu*(ering order docu*ents

hec ing "ith nu*(ers

6) orrect price Auoted

7) 'atching& usto*er order production order despatch notes

Buer orders not *atched

8) :eal custo*er Aueries

6) What are the tests of control o,er ordering#ns)

hec that-1) eference o(tained for all ne" custo*ers2) $e" accounts authori@ed ( senior

3) =rders accepted fro* custo*er "ithin specified credit ter*sand li*its

4) 'atching order docu*ents

7) 'anufacturing co*pan ltd) s a large *anufacturing co*pan sellinga uniAue product) t has an esta(lished custo*er (ase< (ut as itsproduct is uniAue< it also recei,es regular inAuiries fro* potentialcusto*ers that ha,e not (ought products fro* ' (efore) n respectof such ne" custo*ers< ' has a significant ris of ta ing orders fro*custo*er "ho *ight not (e a(le to pa )

What controls should ' put into place to *itigate this ris

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#ns)

1) redit chec fro* redit ating #genc

2) i*it credit ter*s

3) %enior *e*(er sign off orders

4) $e" custo*er accounts re,ie" for pro*pt pa *ent)

Wea co*panies "ill do 1 / 3 onl )

8) nteracti,e&1< p)113

9) .he audit senior at ' has (een as ed to test controls o,er sales. Ghatcontrols will be put into place depend on the nature of the company and the specific ris(s associatedwith the way it operates# but the following controls can be used as examples of how the above ris(scan be mitigated.

Segregation of dutiesN re


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6rder forms prepared only when a pre2 numbered purchase re

Gor(ed example: controls over ordering

Truman )imited buys O &rox? fre


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%hec( orders are supported by a purchase re


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8oods may be misappropriated for private use

8oods may be accepted that have not been ordered

"nvoices may not be recorded resulting in non2 payment

The company may not ta(e advantage of the full period of credit extended

The company may not record credit notes resulting in paying invoices unnecessarily

These ris(s lead to the following control objectives:

All goods and services received are used for the company?s purposes# and not private purposes

8oods and services are only accepted if they have been ordered# and the order has been authori9ed

All goods and services received are accurately recorded

)iabilities are recogni9ed for all goods and services that have been received

*eceipt of goods and services is necessary for a liability to be recorded

All credit notes that are received are recorded in the nominal and payables ledgers

All entries in the payable ledger are made to the correct payables ledger accounts

%ut2 off applied correctly to the payables ledger

%ontrols

The following are types of controls which could be put in place to fulfil the above objectives.

xamination of goods inwards

2Luality

2Luantity

2%ondition

*ecording arrival and acceptance of goods = $re2 numbered goods received notes>

%omparison of goods received notes with purchase orders

*eferencing of supplier invoicesN numerical se


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$rocedures for obtaining credit notes from suppliers

Segregation of duties: accounting and chec(ing functions

$rompt recording of purchases and purchases returns in day boo(s and ledgers

*egular maintenance of payables ledger

%omparison of monthly statements of account balance from suppliers with payables ledger balances

*eview of classification of expenditure

*econciliation of payables ledger control account to total of payables ledger balances

%reate a cut2off accrual of goods received notes not matched by invoices at year2end

Tests of controls

The following tests could be used in relation to the controls noted above.

%hec( invoices for goods are:

Supported by goods received notes

ntered in inventory records

$riced correctly by chec(ing to


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%hec( posting to payables ledger

%hec( for returns that credit notes are duly received from the suppliers

Test numerical se


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2a!ment

is s and control objecti'es

The following ris(s arise at this stage of proceedings:

False invoices are paid in error

"nvoices are paid too soon

$ayment is not correctly recorded

%redits are not correctly recorded

$ayments are not recorded in the right period

The (ey ris( is that money might be paid out by the business inappropriately. Thefollowing objectives arise out of the ris(s:

All expenditure is goods that are received

All expenditure is authori9ed

All expenditure that is made is recorded correctly in the nominal and payables ledgers

$ayments are not made twice for the same liability

Controls

The arrangements for controlling payments will depend to a great extent on the nature of business transacted# the volume of payments involved and the si9e of the company.

%he


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%he


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2 %hec( to suppliers? invoices for goods and services. Ierify that supporting documentsare signed as having been chec(ed and passed for payment and have been stamped O

paid?

2 %hec( to suppliers? statements

2 %hec( to other documentary evidence# as appropriate =agreements# authori9ed expensevouchers# petty cash boo(s etc>

2a!ments cash boo D recordin# > For a sample of wee(s:

2 %hec( the se


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hapter-7

urchase s ste*

1) What are the e ris s associated "ith purchase ordering

#ns&

1) urchase for personal use

2) $ot *ade on *ost ad,antageous ter*s

2) What are the control o( ecti,es to *itigate the ris s of purchase ordering

#ns)

'ost i*portant control- #uthorisation

1) =rders are authori@ed and actuall reAuired ( the co*pan

2) #uthori@ed supplier

3) o*petiti,e price

3) What are the controls to *itigate the ris of purchase ordering

#ns)

1) %egregation of duties- reAuisition and ordering

2) olic for choice of suppliers

3) ,idence for purchase reAuire*ent- eg) pre-set re-order Auantitiesoods recei,ed used for co*pan

2) =nl ordered goods are accepted

3) =rder has (een authori@ed

4) #ccuratel recording goods

5) ia(ilities are recogni@ed for all goods and ser,ices that ha,e (eenrecei,ed

6) eceipt of goods and ser,ices is necessar for a lia(ilit to (e recorded

7) #ll credit notes that are recei,ed are recorded in the no*inal andpa a(les ledgers

8) #ll entries in the pa a(le ledger are *ade to the correct pa a(lesledger accounts

9) ut- off applied correctl to the pa a(les ledger

7) What are the ontrols to *itigate the ris s of goods in"ard and recording

#ns)

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1) xa*ination of goods in"ards

2 Bualit

2 Buantit

2 ondition

2) ecording arri,al and acceptance- re-nu*(ered goods recei,ed notes

3) o*pare goods recei,ed notes "ith purchase orders

4) eferencing of supplier in,oices- eg) nu*erical seAuence and supplierreference

5) hec ing suppliers in,oices

6) prices< Auantities< accurac of calculation

7) o*pare "ith order and goods recei,ed note

8) ecording return of goods- pre-nu*(ered goods returned notes

9) rocedures for o(taining credit notes fro* suppliers

10)%egregation of duties- accounting and chec ing functions

11) ro*pt recording of purchases and purchases returns

12) egular *aintenance of pa a(les ledger

13) o*parison of *onthl state*ents of account (alance fro* suppliers"ith pa a(les ledger (alances

14) e,ie" of classification of expenditure

15) econciliation of pa a(les ledger control account to total of pa a(lesledger (alances

16) reate a cut-off accrual of goods recei,ed notes not *atched (in,oices at ear-end

8) What are the tests of ontrol to *itigate the ris s of goods in"ard andrecording

#ns)

%l)1 hec in,oices for

goods are0. Supported by goods received notes

4. ntered in inventory records

5. $riced correctly by chec(ing to


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. $roperly referenced with a number and suppliercode

. %orrectly coded by type of expenditure

;. Trace entry in record of goods returned etc and seecredit note duly received from the supplier# forinvoices not passed due to defects or discrepancy

2 For invoices of all types %hec( calculations and additions%hec( entries in purchase day boo(

and verify that they are correctly analysed%hec( posting to payables ledger

3 For credit notes Ierify the correctness of credit receivedwith correspondence

%hec( entries in inventory records%hec( entries in record of returns%hec( entries in purchase day boo(

and verify that they are correctly analy9ed%hec( posting to payables ledger

4 %hec( for returns that creditnotes are duly received fromthe suppliers

5 Test numerical se


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2 $rohibitions over signing of blan( che


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'an( reconciliations For a period which includes a reconciliation datereperform

reconciliation= see %hapter 05>

Ierify that reconciliations have been prepared at regular

"ntervals throughout the year

Scrutini9e reconciliations for unusual items

$etty cash payments For a sample of payments:

2 %hec( to supporting vouchers

2 %hec( whether they are properly approved

2See that vouchers have been mar(ed and initialed bythe

%ashier to prevent their re2 use

13)What are the "ea nesses in a purchase s ste*

#ns)

$o procedure to trac purchase in,oice due dates)

14)>i,e 5 exa*ples of tests to (e perfor*ed on the cash pa *ent (oo Term Question

15) ist four exa*ples of purchase docu*entation on "hich nu*ericalseAuence should (e chec ed Term Question

16)Which t"o control acti,ities are *ost li el to reduce the ris of pa *ents(eing *ade t"ice for the sa*e lia(ilit Term Question

hapter-8

Employee Costs

1) What is the e ris related to calculating "ages and salaries

#ns) pa ing too *uch

2) What are the ris s associated "ith calculating "ages and salaries

#ns) o*pan *ight pa e*plo ees-

1) .oo *uch

2) Who ha,e not (een at "or

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3) Who ha,e left

3) What are the controls to *itigate the ris s associated "ith calculating"ages and salaries

#ns)

1) *plo ees are onl paid for "or that the ha,e done

2) >ross pa has (een calculated correctl and authori@ed

3) $et pa has (een calculated correctl

4) What are the tests of controls to *itigate the ris s associated "ithcalculating "ages and salaries

#ns)

1) %taffing and segregation of duties

2) 'aintenance of personnel records / regular chec ing

3) #uthori@ations-

- ngage*ent and discharge of e*plo ees

- hanges in pa rates

- =,erti*e

- $on-statutor deductions e)g) ension

- #d,ances of pa

4) ecording changes in personnel and pa rates

5) Geeping ti*esheets

6) e,ie" hours "or ed

7) ecord ad,ance pa

8) !olida pa arrange*ents

9) #ns"ering Aueries

10) e,ie" "ages against (udget

5) nteracti,e&1

6) What are the ris s associated "ith recording of "ages and salaries anddeductions

#ns)

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1) Darious ele*ents of pa *ight not recorded correctl in pa roll

2) #*ount paid *ight not agree "ith cash (oo s

3) a *ight not (e recorded correctl in the no*inal ledger

4) .ax *ight not calculated correctl

7) What are the controls to *itigate the ris s associated "ith recording of"ages and salaries and deductions

#ns)

1) >ross< net pa < deductions recorded accuratel

2) aid a*ounts recorded correctl in the (an and cash(oo s

3) Wages and salaries correctl recorded in the no*inal ledger

4) #ll deductions ha,e (een calculated correctl and authori@ed

5) orrect a*ount paid to $+

8) What are the controls that should (e in place to *itigate the ris sassociated "ith recording of "ages and salaries and deductions

#ns)

1) +ases for co*pilation of pa roll e)g) loc cards

2) econciling to pa roll infor*ation and appro,al

3) rocedures for dealing "ith non-routine *atters

4) 'aintenance of e*plo ees pre,ious records

5) hec ing pa roll to indi,idual personnel file

6) econciling total pa and deductions (et"een one pa da and thenext

7) o*pare actual pa "ith (udget

8) n,estigate an difference

9) #gree*ent of gross earnings and total tax deducted "ith taxationreturns)

9) What are the tests of controls to *itigate the ris s associated "ithrecording of "ages and salaries and deductions

#ns) Ge control is econciliation of "ages and salaries)

?or "ages reconcile "ith-

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1) re,ious "ee s pa roll

2) .i*esheets

3) osting anal sis

4) roduction (udget

?or salaries reconcile "ith-

1) pre,ious *onth s salar ori,e so*e exa*ples of safeguards created ( the profession)

#ns)

1) ducational training and experience reAuire*ent to entr in profession

2) :

3) orporate >o,ernance

4) rofessional standards

5) rofessional *onitoring J disciplinar procedures

1) xternal re,ie" ( legal third part

11)>i,e so*e exa*ples of safeguards in the "or en,iron*ent)

#ns)

1) n,ol,ing an additional professional account for re,ie" or ad,ice

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2) onsulting an independent third part - eg) rofessional regulator (od

3) otating senior personnel

4) :iscussing ethical issues "ith those charged "ith go,ernance in client

5) :isclosing nature of ser,ices pro,ided and extent of fees charged tothose charged "ith go,ernance

6) n,ol,ing other fir* to reperfor* the engage*ent)

12)What is the period of engage*ent

#ns) ?ro* the co**ence*ent of "or until the final report (eingproduced)

13)What is the e guidline of #+ code

#ns) rofessional accountants should follo" the code in all theirprofessional and (usiness acti,ities)

hapter-15

ntegrit < =( ecti,it and ndependence

1) :efine ntegrit < =( ecti,it < and ndependence)

2) Wh do independence and o( ecti,it *atter so *uch

3) What are the threats to independence :escri(e)

#ns)

1) %elf- interest threat

2) %elf- re,ie" threat

3) #d,ocac threat

4) ?a*iliarit threat

5) nti*idation threat

4) What actions of the client pose threat to the fir* s integrit or professional(eha,ior

#ns) #rise fro*-

1) llegal acti,ities of the client

2) #pparent dishonest of the client

3) Buestiona(le accounting practices of the client)

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5) What should an auditor do "hen client pose threats to fir* s integrit

#ns)

1) %hould (e declined) =r

icaew assurance notes icab kl

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