MID TERM PAPERS
DEPARTMENT OF COMMERCE BZU MULTAN
EXAMINATION: MID TERM, SUBJECT: AUDITING, T.MARKS 30
TIME ALLOWED: 1hrs and 30 MINUTES DATE 05/04/2021, TIME 9AM: TO 10:30A:M
CLASS BS (ACCOUNTING&FINANCE) MORNING, SEMESTER 6TH
COURSE INSTRUCTOR: USMAN ABDULLAH
Q1.
What is the Audit Risk Model as per ISA 330? Marks 5
Q2 (a). You are the audit manager at a client Exim (Private) Limited (EPL). During the
finalization meeting with the client, the CFO of EPL admired the performance of the audit team.
He informed that a junior member of the audit team gave valuable suggestions regarding a trading
business which EPL is considering to launch in the near future, as he had worked as an intern in a
large business house involved in similar business. The CFO also informed that the audit junior
has offered to arrange a warehouse on reasonable rent as he works part time in his brother’s estate
agency.
Required: Identify the threats in the above scenario and suggest appropriate safeguards.
MARKS= 5
Q2 (b). You are the audit manager responsible for the audit of Beachwood Textile Limited
(BTL). At the planning stage, your audit team has assessed that there is no significant risk of
material misstatement due to fraud and management override of controls. The audit team’s
assessment is based on the fact that BTL has been an audit client of the firm for the last 10 years
and no material misstatement had been reported in the previous years.
Required: Guide your audit team with regard to their assessment of risk. Marks 5
Q.3 Distinguish between absolute and reasonable assurance. Identify the type of assurance that is
expected in an audit of the financial statements, clearly outlining the reasons to justify your point
of view. Marks 5
Q.4Briefly describes the assertions used by the auditors in respect of the following:
(i) Account balances
Marks 6
(ii) classes of transactions; (iii) presentation and disclosures
Q. 5 List down the principal contents of an audit engagement letter. Marks 4