Name: TABE EMILY LABELLE NCHONG

Class: LEVEL 300 ACCOUNTANCY

Subject: AUDIT AND ASSURANCE

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FILE ONE
1. Independent of the audit firm

b. Competence and resources to perform the audit

2. Professional clearance

3. Right of access to accounting records

b. Right to receive information and explanation

4. Compliance testing

5. International standards on auditing

6. No

7. No

8. Purchase order

b. Goods received note

9. Occurrence

10. Existence

FILE TWO

Before accepting an audit engagement, au audit engagement partner must consider several
important matters to ensure that the engagement can be conducted in accordance with
professional standards and ethical requirements;

1. Competence and capabilities of the audit firm; They must consider whether the firm has
the necessary skills, industry knowledge and resources to carry out the audit effectively.
2. Compliance with ethical requirements; They must consider the audit firm and its staff can
comply with ethical standards especially independence and objectivity.
3. Significant matters from previous auditors; They must consider if the client had a previous
auditor, understand the reasons for the change and whether there were disputes or issues.
4. Financial and business risk; They must consider the client’s financial stability, risk of going
concern issues or involvement in high-risk industries.

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5. Terms of engagement; They must consider clear agreement on the scope of the audit,
objectives, auditor’s responsibilities and management’s responsibilities.

FILE THREE

1. Internal control and an independent auditor’s review of internal control procedures differ
significantly in purpose. Internal control refers to the processes and systems established by
an organisation’s management to ensure the accuracy of financial reporting, promote
operational efficiency, safe guard assets and ensure compliance with laws and regulations.
 On the other hand, an independent auditor’s review of internal control procedures is
conducted by an external auditor as part of the audit process. The purpose of this review is
not design or implement controls but to evaluate their effectiveness in preventing or
detecting material misstatements in the financial statements. This helps the auditor
determine the nature, timing and extent of audit procedures and to assess audit risk.
 The key difference lies in their purpose and perspective. Internal control is an internal
mechanism used continuously by management for operational and strategic reasons. It is
proactive and preventive in nature. In contrast, the auditor’s review is periodic and focuses
on assessing the reliability of financial information for external users. While internal
control is the responsibility of management, the review is an independent and objective
assessment by the auditor to provide assurance to stakeholders.
2. Internal audit department evaluate whether the company’s internal controls are designed
and operate effectively and whether the financial statements are fairly presented.

b. Internal audit department review the reliability and integrity of financial and operating
information and means used to identify measure, classify and report.

c. Internal audit department review the systems established to ensure compliance with policies,
plans, procedures and regulations that has a significant impact on operations and reports.

d. Internal audit department review the means of safeguarding assets and as appropriate, verify
the existence of such assets.

e. Internal audit department appraise the economy and efficiency with which resources are
employed by the company.

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3. Enhancing risk assessment; Reliable internal audit reports provide valuable insights into
the organisation’s risk arears, allowing external auditors to focus their attention where it’s
needed most.

b. Save time and money ; Since external auditors don’t have to do so much, the whole audit
can be done faster and at a lower cost.

c. Better teamwork; When both internal and external auditors work together, they can plan
better and avoid doing the same work twice.

d. Stronger financial report; If both audits are done well, it makes the company’s financial
statements more trustworthy.

e. Helps find risks early; Internal audit reports can help external auditors see which parts of the
business might have problems so they can focus on those areas.

FILE FOUR

1. Audit engagement
2. When no material misstatements are found
3. State audit
4. Unadjusted errors
5. Oversight of financial reporting

b. oversight of the audit process

6. Appointed by the BOD

7. Corporate governance

8. ONECCA

9. Self-interest threat

b. Familiarity threat

10. Internal audit

11. Professional clearance

12. internal standards on auditing

13. No

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14. No

15. Detection risk

Question one

a. How big the problem is that is it a small mistake or something that could cause big errors
in the financial statement?
 Whether someone outside the company could use it that is could be a fraudster or hacker
take advantage of this weakness?
 If the company knows about it that is management aware of the issue and doing
something to fix it?
 The impact of control affected that is could the issue errors in financial statements that
investors or others reply on?
 How it affects the audit that is will this weakness make the auditor do more work or
change how they do the audit?
b. Be aware of fraud that is auditors must always think about the chance that fraud could exist
in the company.
 Discuss fraud with the audit team that is the audit team should talk about where fraud
could happen and how to spot it.
 Evaluate internal controls that is they should test the company’s internal controls to see if
they prevent or detect fraud.
 Ask management and employees that is auditors should ask if anyone knows of fraud or
risks of fraud.
 Document everything that is the auditor must keep good records of what they did and
what they found.
 Stay professional and sceptical that is auditors should not assume everything. They must
remain alert and careful throughout the audit.

Question two

 If the auditor has a close relationship with someone at the client’s company, they might not
be able to stay neutral that is this will create familiarity threat because the relationship could
affect the auditor’s independence.

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 If the auditor also gives services like preparing accounts, tax advice, they might end up
checking their own work. This can cause self-review threat because the auditor is reviewing
something they helped create.
 If one client pays most of the audit firm’s income, the firm may not want to upset them by
giving a bad report. This is also a self-interest because the firm fears losing money if they
upset the client.
 If the auditor or their firm owns shares or has money invested in the company, they might
want the company to look good so they make a profit. This is self-interest threat because
the auditor might benefit personally.
c. Auditor’s job is to give an honest and fair opinion on the company’s financial statements.
If they are not independent, their opinion can’t be trusted.
 These threats damage the auditor’s reputation and trust people have in the audit profession.
 If the auditors don’t stay objective, it could lead to financial standards and legal problems
for both the auditor and the company.
 Investors, banks and the public rely on auditors to give true information. If they can’t trust
the audit, they may make bad decisions.

Question three

a. Check if the financial statements are true and fair

 Examine the company’s records.
 Assess the internal controls.
 Report to shareholders or owners.
 Detect and report any fraud or error.
b. Right to ask questions.
 Right to access books and records.
 Right to be protected by law.
 Right to information and explanation.
 Right to receive notices of meetings.
c. They give confidence to investors.
 They ensure legal and regulatory compliance.
 They improve the company’s credibility.
 They help detect and prevent fraud.
 They help in decision making.

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Question four

 Internal auditors work inside the company as employees or hired consultants while work
outside the company, usually from an audit firm.
 Internal auditors focus on improving internal controls and preventing fraud while external
auditors focus on checking the financial statements for accuracy.
 Internal auditors help the company run better and reduce risks while external auditors give
an independent opinion on the financial statements.
 Internal auditors report to management or audit committee while external auditor report to
shareholders or owners.
 Internal auditors do audit throughout the year while external auditors do audit once a year,
usually after year-end.

FILE FIVE

 Inaccurate inventory records: Without regular inventory counts and a centralized system,
discrepancies and errors in stock records are likely.
 Increased risk of theft and fraud: The absence of integrated controls and reliance on local
managers increases the potential for stock misappropriation.
 Inconsistent pricing: Without centralized pricing policies, the cost-plus method may be
inconsistently applied across supermarkets.
 Delayed reporting: Mailing accounts quarterly and producing management accounts semi-
annually leads to outdated decision-making information.
 Poor quality of staff: Inadequate skills may lead to errors, non-compliance, and operational
inefficiencies.
 Lack of segregation of duties: Limited controls may allow individuals to control multiple
aspects of a transaction without oversight.
 Difficulty in performance monitoring: Lack of real-time data makes it hard to evaluate the
performance of individual outlets.
 Limited accountability: Managers may not be held accountable due to poor reporting and
monitoring systems.

b. Recommendations for Improving Internal Controls at TEZE:

 Implement a centralized inventory management system.

- Advantage: Provides real-time data for monitoring and planning.

- Disadvantage: High initial setup and training cost.
 Introduce regular inventory counts and reconciliations.

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- Advantage: Improves accuracy of inventory records and detects theft or errors.
- Disadvantage: Time-consuming and may require additional manpower.
 Standardize pricing policies across outlets.

- Advantage: Ensures consistency and prevents profit margin discrepancies.

- Disadvantage: May limit flexibility for local pricing strategies.