audit and assurance accounting questions 1

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Answer Each Question in (100 words)

Question 1

The Chairman of the ABC LLC Muscat complained about you to your audit supervisor that you are disturbing their day to day work and decided not to cooperate with you. This complaint is mainly because you are asking many clarification about the companies operation while auditing ABC LLC and written clarification from directors including chairman. When you audited fund balance of the company you found that the chairman and other directors withdrawn huge amount of money in the pretext of directors remuneration. You also noticed that the company doesn’t have any established policy for paying directors remuneration. Now no other choice that you have to investigate it further to know the truth.

A. In the above context, If the management of the company is not cooperating with you, what measures you can take to complete the audit?

B. How do you defend yourself about managements allegation that you are disturbing their work?

Question 2

Sky Blue LLC is producing and distributing soft drinks across Sultanate of Oman. The company is having good turn over for last few years comparing to the similar firms in the industry. The companies accounting records comprise a memorandum (paper based) cash book, nominal ledger, sales and purchase ledgers. Sales orders, which are normally received on the telephone by the sales manager, are recorded in a two-part delivery notebook only when the order has been produced and is ready for despatch to the customer. When the goods are delivered, one part of the delivery note is given to the customer and the other part remains in the book. When the customer pays the bill amount, Mr. A receive invoice, check and normally won’t compare it with the books copy unless there are any doubts in the invoice. Then he transfers this to Mr. B for accepting payment. Normally Mr. B doesn’t check anything in the invoice because it has been checked by Mr. A , brother of Mr. B.


If you are an auditor of this firm, can you suggest at least five measures to improve internal control in sales order processing in this company?

Question 3

Mr. Adil is the auditor of Spice star LLC a Restaurant based in Muscat. Mr. Adil is an ACCA and he is good in preparing the financial statement. Mr. Adil found that the company is keeping the books of account perfectly except there is a minor mistakes in cash receipts from a customer. The senior auditor is very happy with Mr. Adil because he is able to identify even a minor material misstatement in the company. Before joining the team of the auditor, Mr. Adil was an accountant in the same restaurant for four years. Last time Spice stars accountant Mr. Mohammed, close friend of Mr. Adil, was not able to financialise some of the accounts, Mr. Adil helped him.

1. Can Mr. Adil be an auditor of Spice star? If no what is the ethical threat he has? Give reason for your answer.

2. What is your suggestion for the audit firm to continue auditing spice star?

Question 4

Mr. Yahya Al Saati is the Managing Director and Chairman of Al Saati Group Muscat. Mr. Yahya is very busy in his official duties. Once Mr. Mazin, the auditor of the group have asked some clarification about the overpayment of RO 1.5 million by Al Saati group to Mr. Yahya another family business, Mr. Yahya ordered to remove the auditor from the office with immediate effect. Following this incident, there was a big fight between the audit firm and company’s management regarding the removal of auditors. Company management argued that they have all the right to remove an auditor if he not listening to companies management.


1. Is right for an auditor to ask clarification from the top management official? Give reason

2. Can Mr. Yahya remove Mr. Mazin from the office? If yes, is there any procedure to follow?

Question 5

Ruwi Traders appointed Mr. Waleed as external auditor this year. Mr. Waleed is a fresh graduate and he did not have any previous experience in the field of auditing. He has sound knowledge of various auditing aspects and he is a qualified ACCA. The next day of the work after his appointment, he started doing some analytical procedure to find errors and frauds in the company but he didn’t find any wrongdoing in the company. He collected various evidenced from the company but when he approached the mangers for clarification, all of them are on long leave. Now he could not collect some evidence from them and forced to reach a conclusion with out such a crucial audit evidence. Now he is the verge of preparing a final auditors report.


1. Do you think Mr. Waleed had a right approach in performing his duties? Give reason for your answer.

2. Suggest at least three measures to improve his approach.

Question 6

Since this is the last week of your audit engagement with your client, you don’t have much time to collect large volume of evidence to support your audit work. So you asked your audit assistant to collect most appropriate audit evidence for the following items. Whatever evidence they bring, they should substantiate their choice as most appropriate evidence. Identify the most appropriate audit evidence that your audit assistant can bring for the following items

1. Bank Balance shown in the financial statement.

2. Trade receivables shown in the Receivable accounts.

3. Existence of Fixed asset purchased by the client

4. Wages paid

5. Explanation given by financial manager regarding discount allowed to customers.

Question 7

You are the Managing director of Alfa SAOC based in Muscat. Last time external auditor found so many shortcomings in the control system in the company. This year you are very particular about the accuracy of financial data generated by the company. You wanted to appoint an internal auditor to make sure that the company is operating efficiently. Before appointing an internal auditor, you should prepare the scope of the internal audit. When you asked other directors, they argued that internal auditors job in any company is only a formality and internal auditor could not do much because they are not independent of the company.

Do you agree the with other directors regarding the appointment of internal auditors? Do you think appointment of internal auditors are only for a formality? Give reason for your answer.

Question 8

Since your company lost significant amount of money last year as bad debts, the management decided to make a proper control system for credit sales. You are given the responsibility to establish a good system of internal control in Account receivables management. When you looked at the process of account receivable management, you found that there is no designated person in the company to look after account receivable and the responsibility is given to sales manager. Company never tallies the receivable with subsidiary ledger or cash book because of time constraints. There is a follow up mechanism established the company long back, due to staff shortage no one is there to look after now.

1. How do you design a good internal control system for the company to reduce bad debts. Explain your answer using a diagram, models or illustration.

*** Words count = 1200 words.

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