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AUT621S-AUDITING 202-2ND OPP- JAN 2025 |
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nAmlBIA unlVERSITY
OF SCIEn CE Ano TECHn OLOGY
FACULTYOF COMMERCE, HUMAN SCIENCESAND EDUCATION
DEPARTMENTOF ECONOMICS,ACCOUNTINGAND FINANCE
QUALIFICATION:BACHELOROF ACCOUNTING
QUALIFICATIONCODE: 07 BOAC
LEVEL: 6
COURSECODE: AUT 621S
COURSENAME: AUDITING 202
SESSION: JANUARY/FEBRUARY2025
DURATION: 3 HOURS
PAPER:THEORY
MARKS: 100
SECOND OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINER(S) P.ERKIE
MODERATOR: W. GERTZE
INSTRUCTIONS
1. This test paper is made up of three (3) questions.
2. Answer ALL Question in blue or black ink.
3. Start each question on a new page in your answer sheet.
4. The names of people and businesses used throughout this assessment do not reflect
the reality and may be purely coincidental.
5. Questions relating to this paper may be raised in the initial 30 minutes after the start
of the paper. Thereafter, candidates must use their initiative to deal with any
perceived error or ambiguities & any assumption made by the candidate should be
clearly stated.
THIS QUESTION PAPERCONSISTSOF 4 PAGES(excluding this cover page)
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QUESTION 1 (40 MARKS)
a) Describe in your own words, what is auditing?
(2)
b) Name the stages of the audit process.
(4)
c) Audit procedures are designed to assess the accuracy and reliability of financial
information, verifying compliance with applicable standards and regulations.
Name two types of audit procedures.
(2)
d) Fill in the missing words.
In Namibia, the Auditor-General is appointed by the 1........ ........ on recommendations
of the 2..................... ..and the approval of the 3.....................
(3)
e) The auditor should consider the statutory and ethical requirements and make sure that all
the requirements have been complied with before accepting the audit client.
Define statutory requirement and give an example.
(2)
f) Describe the elements of an assurance engagement.
(10)
g) Internal controls play a vital role in any organization, serving as a framework for achieving
various goals.
i) What are the objectives of internal controls?
(5)
ii) Name components of internal controls.
. (4)
h) The audit Practitioner performing assurance engagement must always comply with the
ethical principles as contained in the SAICA Code of Professional conduct (CPC).
Name and explain the five (5) fundamental principles of the SAICA (CPC)
(10)
i) The preliminary audit engagement stage is a very important stage of an audit. During the
preliminary audit engagement stage, an audit firm should focus on several critical activities
to lay the groundwork for an effective audit.
Name and explain 4 activities to consider in the preliminary audit engagement stage. (8)
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QUESTION 2 {30 MARKS)
1. Introduction
Firezone Ltd ('Firezone ') is a wholesaler of numerous products related to domestic snd
industrial heating, fire extinguishers and other fire fighting chemicals and equipment's.
2. New wholesalers
Firezone searched for suitable property to build and open a new wholesaler. In May 2024, a
suitable property was identified near Okahandja Town Council, for which Firezone secured
funding approval from NERD Bank. However, it was later discovered that the property was
zoned for agricultural use only and could not be used for commercial developments.
At Firezone 's board meeting on 2 June 2024, Ms Clere Daniels (CEO) requested that Firezone
allocate an amount of N$ 500 000 to her. She subsequently paid the N$500 000 to key
councillors at the Okahandja Town Council municipality, after which they immediately secured
re-zoning approval of the property for commercial use. Later, it was established that Ms Clere
had a 50% ownership in the property, which she failed to disclose at the board meeting on 2
June 2024.
3. Governance
Firezone is of the opinion that only an audit committee is necessary for it to adhere to King
IV. Its existing audit committee meets once a year. The minutes of its most recent audit
committee meeting are presented in Annexure A.
AnnexureA
Minutes of Firezone 's Audit committee meeting: 05 August 2024 at 09h00
Audit committee attendees
Name
Clere Daniels
Anne Beukes
Zane Mulla
Role on audit
committee
Chair
Member
Member
Other role(s) on
Firezone 's board
CEO, Chair of the board
None
None
Period serving on
Firezone 's audit
committee as at 5
August 2024
5 years
22 years
2 weeks
No Absentees.
Opening
Clere Daniels welcomed all attendees and thanked them for a 100% attendance and their
dedication to the annual audit committee meeting. She also welcomed Zane to her first meeting.
1. Matters from previous meeting
As no minutes were kept at last year's audit committee meeting, none of the board members
could remember whether any previous matters required follow up.
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2. Resignation of previous and appointment of new audit committee member
Clere informed the rest of the committee that Monicah Jonas CA(NAM) resigned from
Firezone 's audit committee and Firezone 's board with effect 31 March 2024. Monicah did not
have any time to keep her technical knowledge up to date. Since the board did not allow the
audit committee to consult with external specialists due to budgetary constraints, Monicah
decided to resign.
Clere subsequently appointed the Chief Operating Officer's daughter, Zane, as director and
third member of the audit committee, commencing on 22 July 2024. Zane is the only member
in the committee with financial background.
Closure
The meeting closed at 09h30.
Required:
a) Based on Ms Clere's N$500 000 payment to Okahandja Town Council's councillors in 2:
New wholesaler
i) Discuss with reasons, whether there is a reportable inegularity under the Auditing
Profession Act 2005.
(8)
ii) Assuming there is a reportable inegularity, specify the action(s) that the auditors
would have had to take?
(8)
b) With reference to Annexure A, discuss your concerns in terms of the King IV Code of
Corporate Governance.
i) Composition of the Audit Committee
(10)
ii) Composition of the Governing Body
(4)
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QUESTION 3 ( 20 MARKS)
You recently graduated from NUST and was fortunate enough to be appointed in an audit firm
XYZ Incorporated, as the trainee auditor. During your weekly briefings, you were informed
that you have a new assignment to calculate planning materiality for the audit of Hangula Ltd.
Hangula Ltd is a retailer company that sell clothes in Swakopmund, Namibia. The company
has been operating since 2015. Based on your risk assessment, inherent risk was assessed as
low. Use the following information to determine Hangula Ltd is planning materiality for the
year ended 30 September 2023.
Item
Turnover
Unaudited
financial results
N$
15 000 000
Budgeted financial
results
N$
12 000 000
Interval used to
calculate materiality
0.5%- 1%
Profit/(loss) before tax (5 000 000)
7 000 000
5%- 10%
Total Assets
16 000 000
13 000 000
1%-2%
Equity
8 000 000
10 000 000
2%-5%
YOU ARE REQUIRED TO:
a) Calculate planning materiality and substantiate your calculations with reasons explaining
why you used certain figures.
(15)
b) Apart from setting materiality, identify any other five (5) key tasks to be performed during
audit planning.
(5)
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