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AUD812S-ADVANCED AUDITING -2ND OPP-DEC 2025 |
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n Am I BI A u n IVER s ITY
OF SCIEnCE Ano TECHn0L0GY
FACULTY OF COMMERCE, HUMAN SCIENCES AND EDUCATION
DEPARTMENT OF ECONOMIC, ACCOUNTING AND FINANCE
QUALIFICATION: BACHELOR OF ACCOUNTING (HONOURS)
QUALIFICATION CODE: 08BOAH
LEVEL: 8
COURSE CODE: AUD812S
COURSE NAME: ADVANCED AUDITING
SESSION: DECEMBER 2025
DURATION: 3 HOURS
PAPER: THEORY AND APPLICATION
MARKS: 100
SECOND OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINER(S) D.R. MUZIRA
MODERATOR: MARKO TONDOTA
INSTRUCTIONS
1. Answer all questions.
2. Read all the questions carefully before answering.
3. Make sure your name and surname, question number and the
date appears on the answer script.
4. Please ensure that your writing is legible, neat and presentable.
THIS QUESTION PAPER CONSISTS OF 4 PAGES (Including this front page)
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Question 1
(30 marks)
Fashionar Co manufactures women's clothing and its year end was 31 July 2025. You
are an audit supervisor of Jaunty & Co and the year-end audit for Fashionar Co is due
to commence shortly.
The draft financial statements recognise profit before tax of $2.6m and total assets
of $18m. You have been given responsibility for auditing receivables, which is a
material balance, and as part of the audit approach, a positive receivables
circularisation is to be undertaken.
At the planning meeting, the finance director of Fashionar Co informed the audit
engagement partner that the company was closing one of its smaller production sites
and as a result, a number of employees would be made redundant. A redundancy
provision of $110,000 is included in the draft financial statements.
Required:
a) Describe substantive procedures, other than a receivables circularisation, the
auditor should perform to obtain sufficient and appropriate audit evidence to
verify EACH of the following assertions in relation to Fashionar Co's
receivables:
(i) Accuracy, valuation and allocation
(4)
(ii) Completeness, and
(4)
(iii) Rights and obligations.
(4)
b) Describe substantive procedures the auditor should perform to obtain
sufficient and appropriate audit evidence in relation to the redundancy
provision at the year end.
(8)
c) A few months have now passed, and the audit team is performing the audit
fieldwork including the audit procedures which you recommended over the
redundancy provision . The team has calculated that the necessary provision
should amount to $305,000. The finance director is not willing to adjust the
draft financial statements. Required: Discuss the issue and describe the
impact on the auditor's report, if any, should this issue remain unresolved.(10)
Question 2
(20 marks)
You are the audit manager of Violet & Co and you are currently reviewing the audit
files for two of your clients for which the audit fieldwork is complete . The audit
senior has raised the following issues:
DeerCo
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Deer Co's year-end is 30 September, however, subsequent to the year-end the
company's sales ledger has been corrupted by a computer virus. Deer Co's finance
director was able to produce the financial statements prior to this occurring;
however, the audit team has been unable to access the sales ledger to undertake
detailed testing of revenue or year-end receivables. All other accounting records are
unaffected and there are no backups available for the sales ledger. Deer Co's
revenue is $15.6m, its receivables are $3.4m and profit before tax is $2m.
Furr Co
Furr Co has experienced difficult trading conditions and as a result it has lost
significant market share. The cash flow forecast has been reviewed during the audit
fieldwork and it shows a significant net cash outflow. Management are confident
that further funding can be obtained and so have prepared the financial statements
using the going concern basis with no additional disclosures; the audit senior is highly
sceptical about this.
The prior year financial statements showed a profit before tax of $1.2m; however,
the current yearloss before tax is $4.4m and the forecast net cash outflow for the
next 12 months is $3.2m.
Required:
For each of the two issues:
a) Discuss the issue, including an assessment of whether it is material;
(6)
b) Recommend procedures the audit team should undertake at the completion
stage to try to resolve the issue; and
(6)
c) Describe the impact on the auditor's report if the issue remains unresolved.(8)
Note: 1. Report extracts are NOT required.
2.The marks will be split equally between each issue
Question 3
(25 marks)
You are the audit manager of Garlant & Co and you are planning the audit of Bee
Financials Co (Bee), who specialise in the provision of loans and financial advice to
individuals and companies. Garlant & Co has audited Bee for many years.
The directors are planning to list Bee on a stock exchange within the next few
months and have asked if the engagement partner can attend the meetings with
potential investors. In addition, as the finance director of Bee is likely to be quite
busy with the listing, he has asked if Garlant & Co can produce the financial
statements for the current year.
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During the year, the assistant finance director of Bee left and joined Garlant & Co as
a partner. It has been suggested that due to hisfamiliarity with Bee, he should be
appointed to provide an independent partner review for the audit.
Once Bee obtains its stock exchange listing it will require several assignments to be
undertaken, for example, obtaining advice about corporate governance best
practice. Garlant & Co is very keen to be appointed to these engagements, however,
Bee has implied that in order to gain this work Garlant & Co needs to complete the
external audit quickly and with minimal questions/issues.
The finance director has informed you that once the stock exchange listing has been
completed, he would like the engagement team to attend a weekend away at a
luxury hotel with his team, as a thank you for all their hard work. In addition, he has
offered a senior member of the engagement team a short-term loan at a significantly
reduced interest rate.
Required:
a)
What is the meaning of 'auditor independence' in auditing?
(4)
b)
Identify and explain SEVEN ethical threats which may affect the independence
of Garlant & Co's audit of Bee Financials Co, and
(7)
c)
For each threat, suggest a safeguard to reduce the risk to an acceptable level.
(14)
Note: Prepare your answer using two columns headed Ethical threat and
Possible Safeguard respectively.
Question 4
(25 marks)
An auditor who has just joined your audit firm is seeking clarity on ISA 500-Audit
evidence.
Required
Explain the key considerations to make before relying on the work of a specialist.
THE END
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