Auditing Question Bank

Autumn 2009 to Autumn 2016

 Audit and Assurance Page | 2 Question Bank (ICAP Past Papers)

[Structured As Per ICAP Study Text Q 5a

(A-16)
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(a) The management is only responsible for preparation of financial statements in accordance with the
financial reportng framework and for such internal controls as management determines are necessary to
enable the preparation of financial statements that are free from material misstate ment, whether due to
fraud or error. (03)

2 Your firm has been re-appointed as the auditor of Elegant Limited (EL) for the year ended 30 June 2015. Q.2
The frm has been the auditor of EL for the last five years. (A-15)

Required:
(a) How would you assess whether it is necessary to send an audit engagement letter to EL for the year
ended 30 June 2015? ( 5 marks)
(b) State how would you proceed If EL requests your firm to change certain terms of engagement.
( 4 marks)

3 The audit engagement letter specifies objective and scope of audit, responsibilities of auditor and Q.1(b)
management, applicable financial reportng framework and form and contents of audit report. State any (S-15)
four additonal matters that may be included in the engagement letter. (04)

4 Khanewal Limited (KL) has requested your firm to submit engagement letter for KL’s statutory audit. The Q.1
engagement partner has asked you to establish whether preconditons for the audit of KL are present. (A-14)

Required:
What matters would you consider in order to ensure that preconditons for the audit exist? (05)

5 Briefly describe the steps that an auditor should take in order to establish whether preconditons of an Q1 (b)
audit are present. (06) (A-13)

6 List the important matters that are required to be included in an audit engagement letter. (06) Q.9
(A-12)

7 An auditor may agree to a change in the terms of engagement provided there is a reasonable justificaton Q.3
for doing so. (S-12)

Required:

a) List the circumstances in which the management may request the auditor to change the terms of an
audit engagement.

b) What factors should be considered by the auditor before acceptng a change in the terms of the
engagement?
c)
d) (c) List the steps that the auditor should consider, if he is unable to agree to a change in the terms of
engagement. (09 marks)

8 List the circumstances in which it may become necessary to revise the terms of audit engagement for a Q.9
recurring audit. (07 marks) (A-11)
9 Strawberry Pakistan Limited (SPL) was incorporated on March 1, 2011. The directors of SPL are in the Q.1
process of appointng the first statutory auditor of the company. They have requested your firm to (S-11)
submit a proposal for the statutory audit assignment. A partner of your firm has asked you to draft
the proposal after assessing whether the preconditons for the audit exist. Required:

a) Briefly discuss the term ‘preconditons for an audit’.

b) What are the steps that you would perform in order to ensure that preconditons for the audit
exist?
c)
d) Discuss whether your firm may or may not accept the assignment if one of the preconditons for
the audit is not present. (10 marks )

10 (a) A prestgious company has approached your firm to accept appointment as its external auditor. Q.8
State the matters that your firm should consider before acceptng the engagement. (04) (S-10)

(c) Your firm has been the auditor of Mujahid Limited (ML) for many years. Before the
commencement of the current year’s audit ML has requested that some changes be made in the
terms of engagement. Required:

(i) What are the circumstances which may lead to changes in the terms of engagement? (03)
(ii)
(iii) (ii) Discuss the important points which should be considered before acceptng the changes in the
terms of engagement. (05)

Code of Ethics

1 Your firm is the auditor of ABD Limited (ABDL). After the acquisiton of majority shareholding in HG Q.2(b)
Motors (Private) Limited (HGM), ABDL has decided to replace the existng auditors of HGM in the (A-14)
next annual general meeting and has approached you for appointment as HGM’s auditors for the
next year.

Required:
Explain the responsibilites of your firm and the existng auditors in the above situation under the
Code of Ethics for Chartered Accountants. (05)

2 You have recently signed the audit report of Sadiq Limited. The management has approached you for Q.6(d)
reducton in audit fee for the next year because the company has been suffering losses for the past (S-12)
three years. (03 marks )
Audit and Assurance Page | 444 Question Bank (ICAP Past Papers)

Chapter 3