KNEC| KASNEB| KISM| Study notes and Revision materials for schools in Kenya. KNEC certificate courses, Diplomas, Higher Diplomas, KISM courses cpsp-k and aps-k, KASNEB cpa, atd, cs, cifa, ccp, dcm, cict and cict, Ksce and Kcpe
• Most internal controls tend to be directed at routine transactions rather than non- routine transactions. • The possibility of circumvention at internal controls through the collusion of a member of management or an employee with parties outside the entity. • There‘s also possibility of a person responsible for exercising an internal control could abuse
The main function of an internal audit function is to find out whether the internal control system is working successfully or not. The internal audit function usually carries out consistent and regular reviews of the strength and weaknesses of the internal control system and this will act as a deterrent against perpetrators of frauds. This
• The auditor or any one closely connected with the firm should avoid accepting gifts in kind from the client or an officer of the client company, unless the value of the benefit is modest. • Similarly, to strengthen independence, an audit practice or any one closely connected with it should not make loans to
If he destroys any document, vouchers books e.t.c with a view to deceive any person. • If he makes a false statement either in the Balance sheet, or any document. Vouchers or document with the view of deceiving another party. • Where the auditor colludes with management to embezzle the client company money.
Before Appointment • The auditor should assess whether it has the adequate resources to carry on the audit to completion. This is in terms of staff available and timing of the client. • The issue of independence should then be looked into i.e. is the firm related in any way with the client. • The
• Personnel in charge of processing data are normally independent of those responsible for input and output, so as to maintain data integrity. • Processed data is destined to the transaction or master file and nowhere else. From these files, their destinations can be verified. • Transactions, once processed cannot be processed again or duplicated
Auditors responsibility with regard to the prevention and detection of errors and frauds is as follows:- (i) The auditor should remind directors of their responsibilities in prevention and detection of fraud and errors in the engagement letter or other communication and the need to have a system of internal control as a deterrent to errors
i) A voucher is a documentary evidence of a transaction as recorded in the books of account e.g. receipt, invoice etc. Vouching is the process of examining a voucher with the view of proving whether it has been properly authorized, recorded and that the amount is reasonable. Vouching audit thus means the examination of vouchers
The auditors are supposed to give an objective opinion regarding the financial statements at the end of their audit exercise. The auditor should be fair and should not allow prejudice or bias, conflict of interest or influence of others to override objectivity. Independence of an auditor can be defined in the next paragraphs. Independence of
– Purchase of a tangible fixed asset should be authorized by one person. – Once acquired, there should be limited access to the asset i.e. only authorized personnel can gain access or use the equipment. – Ensure asset is kept in good condition, repaired if needed and consistent depreciation methods applied. – Ensure any transaction