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ARHOLIADAU EXAMINATIONS
Mai / Mehefin 2012 May / June 2012
AC31720 THE ROLE AND PRACTICE OF AUDIT
Time allowed: THREE hours
Answer ONE QUESTION from SECTION A
AND
Answer TWO QUESTIONS from SECTION B
All questions carry equal marks. Where questions comprise of multiple parts, their weightings are clearly indicated.
SECTION A
(answer one question from this section)
Question A
(a) Evaluate the view that the Caparo case undermined the role of audit by threatening both actual audit quality and the public perception of its worth. 60 marks
(b) Discuss the auditor’s responsibility relating to fraud. 40 marks
Total 100 marks
Question A
(a) Discuss the meaning and development of ‘non-audit services’. 20 marks
(b) Critically evaluate the view that provision by the auditor of non-audit services should be prohibited. 80 marks
Total 100 marks
TURN OVER
SECTION B
(answer two questions from this section)
Question B
(a) Explain the purpose and content of an audit engagement letter. 20 marks
(b) Your audit firm is about to take on a new client, which is an owner-managed limited company that has been trading for three years. It runs a small chain of popular restaurants in tourist resorts across Wales. The financial statements are prepared by a self-employed Chartered Accountant. Explain the actions you would take before signing the engagement letter. 40 marks
(c) Discuss the ‘business risk’ approach to audit, and evaluate its suitability for the new client described in (b). 40 marks
Total 100 marks
Question B
(a) Discuss the use of sampling in gathering audit evidence. 40 marks
(b) Explain the purpose of external confirmation of assertions regarding trade receivables (debtors). 20 marks
(c) Discuss characteristics of reliable information; and explain how take these into account in designing a debtors’ confirmation test. 40 marks
Total 100 marks
Question B
(a) Explain the internal controls over cash that you would expect to find either in a bar and restaurant or in an owner-managed shop. 30 marks
(b) Explain to a new recruit to your audit firm the actions of the auditor attending a stocktake. 40 marks
(c) Discuss the auditor’s responsibilities where weaknesses in internal control have been identified. 30 marks
Total 100 marks
TURN OVER
