You have been the auditor of Crossborder Trading Company Ltd. for a number of years. The company‘s head office is in Nairobi, Kenya and if has considerable overseas operations. At each accounting year end, there are large debts due from overseas agents of the company (Sh. 270 million out of total debts of Sh. 680 million as at 31 December 2000). In the past, these debts have always been settled after year end but you have insisted that the debts be the subject of a specific representation made by the company‘s director. Required: Draft a paragraph for a letter of representation appropriate to the circumstances described above

―With respect to the debts due from the overseas agent, we acknowledge:
i) That we have included all such amounts as owed and no amounts outstanding are unrecorded.
ii) That as at 31 December 2000, the amounts owed by the agent total to Sh.270 million.
iii) That there is no reason to believe that the amount is not recoverable from the agent overseas. However, in the determination of provision for doubtful debts, this figure is included to determine the general provision

Share through

Share to Download

You have been the auditor of Crossborder Trading Company Ltd. for a number of years. The company‘s head office is in Nairobi, Kenya and if has considerable overseas operations. At each accounting year end, there are large debts due from overseas agents of the company (Sh. 270 million out of total debts of Sh. 680 million as at 31 December 2000). In the past, these debts have always been settled after year end but you have insisted that the debts be the subject of a specific representation made by the company‘s director. Required: Outline the purpose of a letter of representation from management to the auditor.
Hesabu, an accountant of Speed Company Ltd, prepared a bearer cheque for Haraka‟s signature who was the duly authorized signatory. The amount appeared in figures as Sh. 2000, but the amount was not written in words. Haraka signed a cheque. Hesabu then altered the amount to read Sh. 20,000 and he indicated the amount in words, withdrew Shs. 20,000 from the company‟s account. Hesabu handed over Sh. 2000 to Haraka butpocketed the 18,000 being the difference between Sh. 20,000 and Sh. 2,000. Speed
You have received a request form XYZ Ltd. to accept an appointment as their auditor for the financial year ending 31 December 2001. Required: Why is it important for the auditor to hold discussions with the client‘s senior staff?
In the course of the audit of ABC Stationers Ltd. for the year ended 30 June 2001, you have noted and recorded in the audit working papers, the following evidential matters: 1. Flowcharts of the company‘s payroll prepared by your audit assistant backed up by tests of controls. 2. An oral statement by the production director that the expected working life of plant acquired during the year is ten years. 3. A letter to the managing director from the company‘s bank manager indicating that the bank intends to extend overdraft facilities for a period of one year. 4. A list of items of inventory counted by a member of your audit team during observation of the company‘s annual stock count. 5. A letter from a customer to your firm in reply to a confirmation request indicating agreement with the balance recorded in the books of ABC Stationers Ltd. Required: With respect to each matter listed above, explain its relevance to the overall audit objective of forming an opinion and reporting on the financial statements and Explain your judgment on the reliability of the audit evidence obtained in five ways listed above

KNEC| KASNEB| KISM| Ebooks Kenya

Leave a Reply Cancel reply

Related Posts

Leave a Reply Cancel reply