Importance of Statistics in Business

The Institute of charter Accountants of Pakistan Auditing negociate Examination Autumn 2012 Module D Q. 1 5 September 2012 100 marks 3 hours Additional reading time 15 legal proceeding Shahrukh and telephoner, chartered Accountants, have conducted the statutory inspect of the monetary statements of Karim express, a listed friendship, for the twelvemonth ended 30 June 2012 infra the Companies Ordinance, 1984.The job incharge has drafted the following audit report Auditors root to the Members We have audited the annexed counterbalance sheet of Karim limited (the Company) as at 30 June 2012, and the related Income and Expenditure Account, pedagogy of Comprehensive Income, Cash Flow mastery and Statement of Changes in Equity unitedly with the notes forming part thereof, for the course then ended and we state that we have obtained in all the information and explanations which were necessary for the purposes of our audit.It is the responsibility of the companys prudenc e to establish and maintain a form of internal control and prep ar and present the above give tongue to statements in conformity with the approved auditing measurements and the takements of the quaternary schedule to the Companies Ordinance, 1984. Our responsibility is to audit these statements. We conducted our audit in accordance with the auditing standards as applicable in Pakistan.These standards involve that we plan and perform the audit to obtain reasonable and limited assurance about whether the above statements argon free of any misstatement. An audit includes examining evidence supporting(a) the amounts and disclosures in the above said statements. An audit to a fault includes assessing the accounting policies and significant estimates made by counselling, as well as, evaluating the overall presentation of the above said statements.We believe that our audit provides a reasonable ass for our reliance and, after due verification, we report that (a) in our opinion, proper books of accounts have been kept by the company. (b) in our opinion (i) the balance sheet and usefulness and expiry account together with the notes thereon have been worn up in conformity with the Companies Ordinance 1984, and be in agreement with the books of account and atomic number 18 push in accordance with accounting policies consistently apply (ii) the expenditure incurred during the year was in ccordance with the objects of the Company and (iii) the descent conducted, investments made and the expenditure incurred during the year were for the purpose of the Companys business(c) in our opinion and to the outstrip of our information and according to the explanations given to us, the balance sheet, profit and loss account, statement of comprehensive income, hard currency range statement and statement of changes in equity together with the notes forming part thereof, conform with the approved accounting standards as applicable in Pakistan and give the informatio n needed by the Companies Ordinance, 1984, in the manner so essential and respectively give a true and median(a) view of the state of the Companys personal matters as at 30 June 2012 and (d) in our opinion, no zakat was deductible at source under the Zakat and Ushr Ordinance, 1980. Chartered Accountants Date 01 September 2012 required Identify the errors in the above report vis-a-vis a standard statutory audit report. (Note You are not undeniable to redraft the report. ) (12 marks) Auditing Page 2 of 3 Q. 2 As the engagement pardner, you have reviewed the audit working papers of Samarkand Limited (SL). The audit team has highlighted the following matters in the working papers. (a) Twenty percent of the companys recorded turnover (revenue) comprises of funds sales. Proper records of cash sales have not been maintained.Consequently, the audit team was unable to design audit procedures to verify the cash sales. During the current year, the company changed the method of chargin g depreciation on its fixed assets from the straight line to the diminishing balance method. However, all the required disclosures have been included in the notes to the monetary statements. The previous years financial statements were audited by another firm of chartered accountants which has issued an un-modified opinion on those financial statements. (b) (c) Required Discuss the jounce of each of the above matters on your audit report. (10 marks) Q. 3 You are currently in the planning leg of the audit of Mineral Water Limited (MWL) for the year ended 30 June 2012.The following information is on tap(predicate) to you Customer Segment Super markets Wholesalers Retailers Five champion hotels No. of Customers 12 65 553 7 counterbalance 10 10-20 21-30 31-90 > 90 salient(ip) age days days days days Rs. in deoxyguanosine monophosphate.. 20,014 8,125 5,053 6,396 311 129 14,910 5,078 6,019 3,150 454 209 4,743 1,756 1,798 724 278 187 7,694 2,805 2,793 1,784 201 111 47,361 17,76 4 15,663 12,054 1,244 636 50% provision for doubtful debts has been made by MWL against balances outstanding for more than 30 days whereas the balances outstanding for more than 90 days have been full provided. Required (a) Indicate what would be the basis for selecting debtors for circularising verifying and negative requests for confirmations. 06 mark) (b) Briefly explain as to how would you believe with a location where a debtor confirms a balance which is different from the amount appearing in the confirmation request. (08 mark) Q. 4 (a) Classification of certain items inform in the financial statements is based on the managements intentions. In such a situation the auditor has to rely on management representations. Required List the factors that the auditor should consider in evaluating the managements intentions with regard to their future course of activeness, as stated in their written representations. (04 mark) (b) Briefly dissertate how the auditor would deal with a s ituation where he is in doubt regarding the reliability of the written representations provided by the management of the company. (05 mark) Q. 5List the substantive procedures that may be performed by an auditor to verify the following (a) (b) (c) commit propitiation statements Payroll Raw material purchases (06 marks) (08 marks) (06 marks) Auditing Page 3 of 3 Q. 6 List the audit procedures that may be performed by the auditor in ordinate to ensure that all events occurring between the date of the financial statements and the date of the auditors report that require adjustment of, or disclosure in, the financial statements are identified and appropriately reflected in the financial statements. (10 marks) Q. 7 Discuss the categories of threats that may be involved in each of the following item-by-item situations and advise the partners of the pertain firm with regard to the possible course of action that may be followed, in each case.a) Burewala Bank Limited (BBL) is a listed audit client of Umer and Company, Chartered Accountants (UCC). BBL has granted a house loanword of Rs. 5 one thousand thousand to a partner in UCC. (04 marks) Kamal was the audit manager during the last years annual audit of Faisalabad Textile Mills Limited (FTML). He has joined FTML as their Manager Finance, prior to the commencement of the current years audit. (08 marks) (b) Q. 8 Comment on each of the following independent situations with reference to the applicable rules and regulations. (a) Zaman is a partner in a firm of Chartered Accountants and holds 5,000 shares in Mardan Limited (ML). His firm has received an offer for trying on as auditors of Khanewal Limited (KL).ML and KL are subsidiaries of Dera Khan Limited (DKL). (03 marks) Bilal and Company has received an offer for appointment as auditors of IJK Limited. The total paid up capital of the company is Rs. 990 million whereas its ordinary share capital is Rs. one hundred thirty million. Faryal, the wife of a partner in Bilal and Company, is a director in LMN Limited which holds 50 million non-voting preference shares and 2 million ordinary shares in IJK Limited. Faryal also holds 10,000 shares in LMN Limited. The par value of both types of shares is Rs. 10 each. (04 marks) (b) Q. 9 List the important matters that are required to be included in an audit engagement letter. (06 marks) (THE END)