THIS IS YOUR HOMEWORK 1

Hi my ACC 3573 students !

Please do complete this tutorial by Tuesday 21st July 2010

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Tutorial : Chapter 1

Multiple Choice Questions.
Choose the most appropriate answer.

1. A typical objective of an operational audit is to determine whether an entity’s
A. Internal control is adequately operating as designed
B. Operational information is in accordance with generally accepted governmental auditing standards
C. Financial statements present fairly the results of operations
D. Specific operating units are functioning efficiently and effectively

2. In auditing financial statements, the auditors main concern is to determine whether

A. the financial statements properly reflect the economic events that occurred during the accounting period
B. the management has committed fraudulent transaction
C. the taxable income has been calculated correctly
D. the entity has complied with all relevant laws and regulations

3. Which of the following is an incorrect phrase?

A. Auditing communicates results to interested users
B. Auditing evaluates evidence regarding assertions
C. Auditing subjectively obtains and evaluates evidence
D. Auditing is a systematic process

4. An independent audit aids in the communication of data because the audit

A. Confirms the accuracy of management’s financial representations.
B. Guarantees that financial data are fairly represented.
C. Assures the reader of financial statements that any fraudulent activity has been corrected.
D.Lends credibility to the financial statements.

5. Operational Auditing is oriented primarily towards:

A. The accuracy of data in financial statement.
Future improvements to accomplish the goals of management.
Verification that company’s financial statements are fairly presented.
Past protection provided by existing internal control.



Indicates whether each of the following statement is True or False
1. Auditing is the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and establish criteria.
2. Auditing is based on the assumption that the accounting records and data are either verifiable or non-verifiable.
3. Audit is an independent examination of, an expression of opinion on the financial statements of an enterprise by an appointed auditor.
4. Compliance auditing reports on fairness of the financial statement.
5. The government auditors will report solely to the Ketua Audit Negara
6. Auditing is the process of recording, classifying and summarizing economic events in a logical manner for the purpose of providing financial information for decision making by the various users of financial statements.

Short essay question

QUESTION 1
Modern accounting and auditing born during industrial revolution in which corporation needed to raise capital to finance expansion. The issuance of shares and bonds to public had lead to the presence of absentee owner (shareholder). Shareholders appoint managers to act as their agent to manage the company.
Required:

a. Differentiate between accounting and auditing. (4 marks)
b. List three (3) benefits that could derive from auditing. (3 marks)
c. Agency relationship between shareholders and managers will produce a natural conflict of interest. Explain. (3 marks)
d. Briefly explain three (3) general types of audits. Your answer should include definition and example. (6 marks)

QUESTION 2

Johari , the sole owner of a small hardware business, has been told that the business
should have financial statements audited by an independent CA. Johari, having some
book keeping experience, has personally prepared the company’s financial statements
and does not understand why such statements should be audited by a CA. Johari
discussed the matter with Kassim, a CA and asked Kassim to explain why an audit is
considered important.

Required:
a. State the objectives of an independent audit. (2 Marks)
b. Identify four (4) ways in which an independent audit may be beneficial to Johari. (4 Marks)
c. State two (2) responsibilities of directors on financial statements as stated under Section 169, Companies Act 1965 and its amendment in 1998. (4 Marks)