UNIVERSITY OF MAURITIUS

FACULTY OF LAW AND MANAGEMENT

FIRST SEMESTER EXAMINATIONS

NOV/DEC 2016

BSc (Hons) Accounting (Minor: Finance)

BSc (Hons) Accounting (Minor: Business Informatics)
PROGRAMME

Level III, Fee-Paying

MODULE NAME ADVANCED AUDITING

Friday
DATE 02 December 2016 MODULE CODE ACF3003 (5)

TIME 13.30 – 15.30 Hours DURATION 2 Hours

NO. OF 4 NO. OF QUESTIONS 3

QUESTIONS SET TO BE ATTEMPTED

INSTRUCTIONS TO CANDIDATES

This paper consists of 4 questions and 2 Sections (Section A and B).

Section A is Compulsory.
Answer ANY TWO (2) questions from Section B.
 Advanced Auditing – ACF3003 (5)

SECTION A (COMPULSORY)

Question 1

You have recently joined Alpha Ram & Co, a firm of auditors. You have been assigned to
the Audit of Nortopia Ltd, a company dealing in the rearing of livestock. During the audit,
you have noticed a few issues which have been duly considered but as these were not
considered material, an unqualified audit report will be issued.

One week prior to the issue of the audit report, you hear over the press that some
neighbouring farms have been affected by the Food and Mouth disease, rendering all of
their stock unfit for human consumption. This would have no bearing on your audit but
you notice, during your final meeting with the Directors of Nortopia that the Ministry of
Health officials are carrying out an inspection. You enquire from the Directors who state
that this is a normal routine check-up being carried out in all farms.

An unqualified audit report is issued on the same day that the client receives a notification
from the Ministry that some of the cattle of Nortopia have been infected with the disease.
You are slightly worried as you were having your meals in a nearby restaurant that was
supplied by Nortopia. The Directors reassure you that all infected animals were part of a
new stock that has been purchased after the balance sheet date.

An unqualified audit report is issued.

The day preceding the Annual Meeting of Shareholders that will approve the financial
statements for issue, an official notice is issued by the Government Department for Health
stating that all the farms of that particular area, including Nortopia, had been infected by
the disease and since at least one month prior to the balance sheet date of Nortopia.

The Directors do not believe that the financial statements should be changed as they are so
close to the Annual Meeting of Shareholders and are reluctant to have representatives of
your firm at the said Meeting as you expect that the potential impact on the inventories
would negate all the profits declared for the year and threaten the survival of the Company.

Required:
1. Explain the procedures that the auditor has to undertake in respect of Subsequent
events. [10 marks]

2. Explain the various types of report issued by an Auditor.

[10 marks]

3. What are the procedures that the auditor should have carried out when he first became
aware of the occurrence of the disease at Nortopia? [15 marks]

4. What steps, if any, should the auditor take in respect of the Audit Report to be
presented at the Annual Meeting of Shareholders of Nortopia?
[15 marks]

[Total: 50 Marks]
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 Advanced Auditing – ACF3003 (5)

SECTION B

Answer ANY TWO (2) questions in this Section.

Question 2

The management of Jules Co has invited Print Co Ltd, an audit firm, to submit an audit
proposal for their consideration. Jules Co was established only two years ago, but has
grown rapidly, and this will be the first year that an audit is required. In previous years a
limited assurance review was performed on its financial statements by an unrelated audit
firm. The company specialises in the sales of medical products and some of its start -up
funding was raised from a venture capital company. There are plans for the company to
open branches overseas to extend its market.
Jules Co has one full-time accountant who uses an accounting package (Oracle) to record
transactions and to prepare financial information. The company has a financial year ending
31 March 2016.
Further to a meeting which the company had with the manager of Print Co Ltd, Mr Brad
Jules, the owner-director, raised the following issues:
 The audit fee should be competitive
 It is worth spending more money on value added services, such as strategic advice
than an audit services
 An audit would be more beneficial if the audit fee is linked to the company’s success
in expanding overseas as a result of the audit firm’s advice.
 The audit should not be too disruptive and to be completed within four months of
the year end.’

Required:

(a) Explain the specific matters to be included in the audit proposal, other than those
relating to the audit fee. [13 marks]

(b) Assuming that Jules Co is appointed to provide the audit service to Print Co Ltd,
discuss the issues to be considered by the audit firm in determining a fee for the
audit including any ethical matters raised.
[12 marks]

[Total: 25 marks]

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 Advanced Auditing – ACF3003 (5)

Question 3

‘Financial Statements can only be audited by Licensed Auditors in Mauritius’.

Required:

Discuss this statement with emphasis on:

a) Licensed Auditors,
[6 marks]
b) Types of Companies,
[7 marks]
c) Requirements for the preparation of Financial Statements
[6 marks]
d) Standards applicable.
[6 marks]

[Total: 25 marks]

Question 4

Given the prevalence of corporate failures and scandals, auditors are facing increasing
pressure to tighten controls.

Required:

(a) Explain the responsibilities of the various members of an audit team in respect of
quality control and compliance with ethical requirements.

[13 marks]
(b) Explain the stages that are present in laundering money.
[12 marks]

[Total: 25 marks]

END OF QUESTION PAPER

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