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The document outlines various audit scenarios involving Tariq Limited, Yaqoob Limited, Shahbaz Chemicals Limited, Fresh Dairies Limited, Concordia Limited, and a dispute involving Tariq Limited and a supplier. It details the steps auditors should take in situations such as warranty provisions, inventory counts, and confirmation requests, as well as considerations for audit reports. Additionally, it discusses the implications of management's refusal to allow confirmations and the appropriateness of written representations as audit evidence.

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13 views

test-8

The document outlines various audit scenarios involving Tariq Limited, Yaqoob Limited, Shahbaz Chemicals Limited, Fresh Dairies Limited, Concordia Limited, and a dispute involving Tariq Limited and a supplier. It details the steps auditors should take in situations such as warranty provisions, inventory counts, and confirmation requests, as well as considerations for audit reports. Additionally, it discusses the implications of management's refusal to allow confirmations and the appropriateness of written representations as audit evidence.

Uploaded by

mehmuud.cma
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Question # 1

You are the audit partner of the firm and your manager has highlighted the
following matters:
(a) The profit before tax of Tariq Limited (TL) for the year ended 30 June 2017 is
Rs. 790 million. TL provides three year warranty to its customers and has made
provision of Rs. 80 million in this regard. The management carries out the
computation internally. The process is complex and based on various assumptions.
Therefore, your firm has appointed an expert after following all the necessary
procedures for assessing the competence, capability and objectivity of the expert.
(08)
(b) Your firm has been appointed as the auditor of Yaqoob Limited for the audit of
the year ended 30 June 2017. The audit team was not able to perform the inventory
count at year end because the appointment was made on 15 July 2017. (07)
Required:
Describe the steps that will be performed in each of the above situation and
discuss the possible implications of the above on the audit report. (Drafting of
audit opinion is not required)
Question # 2
During the audit of Shahbaz Chemicals Limited (SCL) for the year ended 31
December 2016, the audit team had noticed that sales of SCL has declined due to
various reasons and SCL is facing difficulties in selling the existing stock of
inventory at current price levels.
Required:
Explain the steps which the auditor should perform to ensure that carrying value of
inventories is based on lower of cost and net realisable value. (04)
b) Discuss the auditor’s course of action if management refuses to allow auditor to
send confirmation request. (Impact on audit report is not required) (05)
Question # 3
You are the audit senior on the audit engagement of Farhan Foods Limited and
assigned to attend the inventory count.
Required:
(a) State what matters you would consider while observing the inventory count.
(05)
(b) State the procedures to be performed during the final audit in relation to the
cut-off assertions for sales and purchases. (03)
Question # 4
You are currently in the planning phase of the audit of Fresh Dairies Limited (FDL)
for the year ended 31 December 2016. The information available to you in respect
of the company’s debtors includes the following:

Customer category Number of Balance Percentage of


customers outstanding (Rs. in customers who
‘000) confirmed the
balance last year
Distributors 20 30,500 90%
Wholesalers 2,250 12,750 70%
Restaurants 12 20,400 83%
Individual 5,700 9,800 20%
customers
TOTAL 73,450

FDL is a low risk client and therefore you are assessing whether to send negative
confirmation requests.
Required: In respect of each of the above categories of customers, discuss the
appropriateness of sending negative confirmation requests. (09)
Question # 5
You are the audit manager in a firm of chartered accountants. Following is the
extract of the email received from the job-in-charge responsible for the audit of
your client Concordia Limited (CL) for the year ending 31 March 2018:
“I am considering to circulate negative confirmations on 1 April 2018 for debtor
balances outstanding as on 31 March 2018 as firstly, the reporting deadlines at CL
are very stringent, secondly, the population comprises of a large number of small
balances and thirdly, risk of material misstatement has been assessed as low.
I have also been offered by CL’s CFO that one of their staff would get all the
confirmations signed from the debtors and deliver them to our firm’s office. This
could help us in meeting the reporting deadline.”
Required:
Comment on the suggestions of the job-in-charge. Assuming that the suggestion by
job in charge is not considered appropriate, suggest an alternative approach
keeping in view the time limitations. (06)
Question # 6
Tariq Limited (TL) is in dispute with one of its suppliers Hamid (Private) Limited
(HPL) over a claim of Rs. 10 million; due to quality issues with the product. The
management has informed you that negotiations with HPL have concluded and
HPL has agreed to pay Rs. 7 million whereas the rest of the amount would be
written off. TL’s management has provided a written representation to the auditor
with respect to the said receivable. However, they want to preclude the auditor
from sending a confirmation to HPL.
Required:
Evaluate the appropriateness of written representation as audit evidence and
determine the course of action available to the auditor in the above situation. (07)

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