Final Exams
emma_94
FINALEXAM-AUDITING.pdf
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NIZWA COLLEGE OF TECHNOLOGY BUSINESS STUDIES DEPARTMENT
SEMESTER -2 / ACADEMIC YEAR 2019-2020 FINAL EXAM (ASSIGNMENT)
COURSE CODE BAAC4203
COURSE NAME AUDITING AND CONTROL 2
LEVEL B.TECH
TUTOR(S) MS. MARIA VIDAL
SECTION(S) 1
DURATION:
DATE TIME
START 19 MAY 2020 9:00AM
END 21 MAY 2020 8:00AM
MARKS BREAK UP:
No. of Questions Marks for Each Question
1 10
2 10
3 10
4 10
5 10
TOTAL MARKS 50
INSTRUCTIONS: 1) The Final Assignment will be available in Moodle at 9:00 am on the date of examination.
2) This is an open resource examination; there are 5 questions that should be answered. Students are allowed to refer
any digital materials (Internet, ProQuest, Masader, and OER) with proper referencing and citation for each answer.
3) Students have to answer the questions typewritten in the word (.docx) format. Figures / Diagrams, equations and
solving of problems can be written by hand and added to the document as a picture/image. Font should be in
Times New Roman, size 12, 1.5 space, in A4 paper size.
4) Save the assignment file using the student ID & Course code: [Eg: 22s1234 – BAAC4203]
5) Students should submit the answers through the turnitin link provided in moodle page. Assignment can be
uploaded in the moodle only once, so please check your answers before uploading them. The teacher will not
delete any assignment for any student to upload them again. If any problem occurs, send it to the staff email
6) Students are encouraged to upload the answers in the moodle at least two hours before the deadline to avoid any
technical issues.
7) In case of any technical problem in opening or submitting your assignment, please contact your course tutor
through email and copy furnished the Department Head.
8) Any form of cheating is punishable. Students involved in cheating will be treated according to the Plagiarism and
Academic Integrity Policies.
9) Students are advised to write the answers in their own words. Based on the plagiarism policy and the department
approved similarity level, the marks will be deducted for the plagiarized [copied] answers.
10) Students should complete their assignment within the given time. Assignments submitted after the deadline will be
marked 0.
ACADEMIC INTEGRITY & PLAGIARISM POLICY: The student should be ready to prove the authenticity of the work done. If any form of plagiarism/reproduction of answers are discovered, student will be awarded zero marks. DECLARATION: I declare that the Final Exam (assignment) submitted is original and acknowledge that I am aware of the NCT’s Integrity and Plagiarism Policies (January 2011) mentioned in moodle, and the disciplinary guidelines and procedures applicable to breaches of such policy and regulations.
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I AGREE TO THE TERMS AND CONDITIONS:
STUDENT NAME
STUDENT ID
DATE OF SUBMISSION
QUESTIONS
Scenario-Based Analysis (5Q *10M= 50 MARKS)
Instruction: Answer all the requirements in each question in not less than 300 words. Each
question carries ten (10) marks.
Question No 1: (3+2+2+3=10 Marks)
Assume that you are an independent auditor who runs your own auditing firm. Salma Company was
your client last year who engage another independent auditor this year because of some issues on
auditing fees. You know that Salma Company is having less profit now because of competition with
Khalsa Company. Because of this reason, Salma Company wants to buy Khalsa Company. Just two
months ago, Hajir Company became your new client. Hajir Company’s previous auditor suddenly
had a heart attack, so the company came to you for audit services and you accepted them. Today,
Hajir Company’s director came to you to discuss that they also intend to buy Khalsa Company. The
director knows that there is another company who wants to buy Khalsa Company too, but they are
not aware that it is Salma Company and they also don’t know that you were Salma Company’s
previous auditor. When the meeting is over, you start to feel uncomfortable. Since Hajir Company is
your new client, you want to help them and provide good service to them. But you realise that you
also possess confidential information concerning the plans of your previous client, Salma Company.
You are aware of Salma Company’s problems and you know it will help Salma Company to recover
profits if they will acquire Khalsa Company.
Required: Explain your answer to the following questions:
1. Which fundamental ethical principles in ISA 200 will be affected in this scenario? You can
explain more than one ethical principle, if applicable. (3 marks)
2. Can you disclose confidential information in this scenario? Explain your opinion. (2 marks)
3. How will you protect your reputation as an independent auditor? (2 marks)
4. What could be the possible course of action? (3 marks)
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Question No 2: (2x5=10 Marks)
Assume that you are a newly appointed junior auditor in PwC, an auditing firm. After a 3-month
rigorous training on the job, you have been awarded the certificate of completion and is now ready to
embark on your very first assignment. Today, your first job was to evaluate the audit evidence
gathered by your team from Salalah Trading and see if they are reliable or not based on ISA 500. The
following are the evidences gathered in various forms:
a) Your senior auditor assigned you to directly observe how a sale transaction is done in Salalah
Trading. You were given three days to observe the sale transaction completely.
b) You need to get confirmation from customers if they really are paying their loans to Salalah
Trading. The customers you have interviewed gave you their oral confirmation.
c) Your colleague, the auditor in-charge of physical examination of inventory of stocks gave
their written report to you as part of audit evidence.
d) In the file of audit evidences, you also found the ratio analysis done by the previous auditors
of Salalah Trading.
e) You also collected from the Sales Department the written agreements between the company
and their customers about “no refund policy”. They were signed by both the customers and
the manager.
Required:
Evaluate the reliability of each of the documents above and identify the one that is considered the
most reliable and least reliable. (2 marks each)
Question No 3: (3+7=10 Marks)
Your firm has been appointed as the new auditor for Muscat Repair Services, a small company which
has been operating for only a year and half. Your team was assigned to do the company’s very first
audit examination. As the audit progresses, your team found it very difficult, as the client did not
maintain appropriate financial records. The financial records were not updated for the first 9 months
of the year because Muscat Repair Services has on and off bookkeepers during this period. You were
told that they cannot find a permanent bookkeeper at that time, so only part-time bookkeepers were
recording for the company. A permanent bookkeeper, who was employed only nearing the end of the
year, tried to reconstruct records from the details of incomplete receipts and payments available. The
bookkeeper was not able to reconcile the bank accounts, and your team is not satisfied that all
transactions that occurred during the year are included in the financial statements. Moreover, some
assets like furnitures, fixtures, equipment were not included in the records. The operating income
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recorded by Muscat Repair Services in the current year is OMR 10,250, far from the expected
amount reconstructed by the auditors which is OMR 20,000.
Required: Explain your answer to the following questions:
1. Based on the given situation, write your reasons if the auditor can form his opinion on the financial
statements? Formulate your answer based on ISA 200 and ISA 700 concepts. (3 marks)
2. What are the key decision points that could be obtained by the auditor from the case in forming his
opinion? Determine the appropriate auditor’s opinion to be included in the auditor’s report whether
Unmodified Opinion or Modified Opinion. Justify your decision. (7 marks)
Question No 4: (10 Marks)
You have been appointed as audit team leader to audit Badr Hospital, a private hospital, that owns
several branches across Oman, for the end of year. The hospital has been operating for the last seven
years and has just been your audit firm’s client this year. The hospital has been doing well in the last
four years, earning sufficient amount of income to establish four branches already in the big cities in
Oman. Just last year, the hospital established its internal audit department. Previous auditor disclosed
that recently the hospital has been having problems in its data base and patient records due to the
increase in number of patients and consistent resignations of employees assigned on recording
complaining of small salary packages. Your team’s initial assessment discovered that total assets of
the hospital as of December 31, 2019 amounted to OMR 400 million, total revenue OMR 50 million
and for the first time in seven years, they had a net loss amounting to OMR 5 million. Long term
debt amounted to OMR 400 million, which was constantly paid late in the last two years. In an
attempt to solve their data base problem, last year also, the company has computerized its patient
recording system by outsourcing the software from a company abroad. The management is very
apprehensive to get the hospital back on its feet and expects your team to report on weaknesses in
design and implementation of internal controls on top of the usual audit of financial statements.
Required: Discuss matters that you would consider in developing the audit strategy for Badr
Hospital.
Question No 5: (5+5=10 Marks)
According to ISA 520, analytical procedure means “the evaluation of financial information through
the analysis of plausible relationships among both financial and non-financial data. It includes the
investigation of identified fluctuations, or relationships that are inconsistent with other relevant
information, or that differ from expected values by significant amount”. Corona virus or the
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COVID19 pandemic has affected most, if not all, of the business industries not only in Oman but all
over the world. This is due to the imposed “lockdown” of areas affected by the pandemic to not
spread the disease and worsen the situation. One of the industries that are considered affected by this
pandemic is the Airline Industry. Based on the news, countries have been closing their airports both
international and domestic and airlines were cancelling flights. Because employees are getting sick
or afraid to contract the virus, only few are able to report to work. Assume that you are a member of
an audit team assigned to analyze the effects of the corona virus (COVID19) pandemic on
businesses. Answer the following questions related to this business sector: Airline Industry
(example Oman Air).
Required: Answer the following questions on analytical procedures:
1. In your opinion, will this business sector be favorably or unfavorably affected by the COVID19
pandemic? Explain your answer focusing on the financial impact. (5 marks)
2. How could the auditor analyze the financial impact to the industry given? Give at least two
suitable examples of analysis that you can use to analyze the impact of the pandemic to a specific
business belonging to the airline industry, like the Oman Air. (5 marks)
-----ALL THE BEST-----
