Your audit senior has assigned you the responsibility of auditing the stock of your client, XYZ Supermarket Ltd. for the year ending 31 December 2005. The company‘s stock take is carried out once a year in the month of November simultaneously for all the retail outlets. Required; define the word ―bar coding‖ and explain its importance to XYZ Supermarket Ltd

Bar coding
It is a form of identification for all the products in the supermarket. Each product has a bar code number to identify it from other products. The product bar code number is read by the bar code reader so as to identify the product and its price.
Importance of bar coding
– To identify each specific product
– To identify the price of each product
– To save supermarket on costs of attaching price tags to each product.

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Your audit senior has assigned you the responsibility of auditing the stock of your client, XYZ Supermarket Ltd. for the year ending 31 December 2005. The company‘s stock take is carried out once a year in the month of Novembersimultaneously for all the retail outlets.Required:Describe the audit procedures that you would perform in order to be satisfied as to the validity of the amount attributed to stock in the balance sheet of XYZ Supermarket Ltd
Your audit senior has assigned you the responsibility of auditing the stock of your client, XYZ Supermarket Ltd. for the year ending 31 December 2005.The company‘s stock take is carried out once a year in the month Novembersimultaneously for all the retail outlets.Required:State the audit assurances you would seek to obtain in the audit of stock
Your firm audits Clean Paints Ltd. and you are planning the audit of stock and work in progress for the year ended 31 December 2000. Clean Paints Ltd. determines the value of stock in its financial statements by the year -end stocktake. There is no perpetual Stock Inventory System though stock is counted quarterly for the purposes of management accounting.Stock and work in progress is held at the warehouse which is next to the company‘s factory.Required:State the areas that you will expect the client‘s stocktaking instructions to cover
. Your firm audits Clean Paints Ltd. and you are planning the audit of stock and work in progress for the year ended 31 December 2000. Clean Paints Ltd. determines the value of stock in its financial statements by the year -end stocktake. There is no perpetual Stock Inventory System though stock is counted quarterly for the purposes of management accounting.Stock and work in progress is held at the warehouse which is next to the company‘s factory.Describe the work you will perform and the matters you will record at the stocktake attendance
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?
You have recently been appointed external auditor of ABC Ltd. What typical planning procedures would you undertake when planning the audit of ABC Ltd.?
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Explain how you would use a computer audit programme to verify the year-end debtors balances
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
Write brief notes on the following auditing techniques: Inspection, Observation and Enquiry
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Bafu Ltd., a private limited company, manufactures a wide range of bathroom fittings. These fittings are made from steel components which are chromed in small vats. The steel components are sourced from outside suppliers. The year end stock mainly consists of these steel components and finished items. As at 31 October 2004, the total stock was valued at Sh. 6,048,000 out of total assets of Sh. 19,200,000. This stock figure was obtained by a physical count as at 31 October 2004, and valuation by reference to purchase invoices and manufacturing cost estimates. Required: With reference to each of the matters listed below, state the work you would do to conclude whether the amount attributed to stock is fairly stated. Identification of stock items
Bafu Ltd., a private limited company, manufactures a wide range of bathroom fittings. These fittings are made from steel components which are chromed in small vats. The steel components are sourced from outside suppliers. The year end stock mainly consists of these steel components and finished items. As at 31 October 2004, the total stock was valued at Sh. 6,048,000 out of total assets of Sh. 19,200,000. This stock figure was obtained by a physical count as at 31 October 2004, and valuation by reference to purchase invoices and manufacturing cost estimates. Required: With reference to each of the matters listed below, state the work you would do to conclude whether the amount attributed to stock is fairly stated;Condition of stock items
Bafu Ltd., a private limited company, manufactures a wide range of bathroom fittings. These fittings are made from steel components which are chromed in small vats. The steel components are sourced from outside suppliers. The year end stock mainly consists of these steel components and finished items. As at 31 October 2004, the total stock was valued at Sh. 6,048,000 out of total assets of Sh. 19,200,000. This stock figure was obtained by a physical count as at 31 October 2004, and valuation by reference to purchase invoices and manufacturing cost estimates. Required: With reference to each of the matters listed below, state the work you would do to conclude whether the amount attributed to stock is fairly stated; Valuation of stock
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You have recently been appointed as the external auditor of XYZ Ltd. Explain the stages you would in the conduct of your audit
Briefly explain the meaning of the following terms as used in auditing: The materiality concept and the going concern concept
Your are currently engaged in planning the audit of the payroll system of Ujenzi Ltd a manufacturing company, for the year ending 30 June 2005, Ujenzi Ltd‘s payroll system is fully computerized. Required: Explain four ways in, which the use of a computerized payroll system by Ujenzi Ltd, would affect your work as the auditor
Bafu Ltd., a private limited company, manufactures a wide range of bathroom fittings. These fittings are made from steel components which are chromed in small vats. The steel components are sourced from outside suppliers. The year end stock mainly consists of these steel components and finished items. As at 31 October 2004, the total stock was valued at Sh. 6,048,000 out of total assets of Sh. 19,200,000. This stock figure was obtained by a physical count as at 31 October 2004, and valuation by reference to purchase invoices and manufacturing cost estimates. Required: With reference to each of the matters listed below, state the work you would do to conclude whether the amount attributed to stock is fairly stated; Quantities
Explain five factors which would indicate to the auditor that the going concern assumption of the business entity he is auditing is threatened
Bafu Ltd., a private limited company, manufactures a wide range of bathroom fittings. These fittings are made from steel components which are chromed in small vats. The steel components are sourced from outside suppliers. The year end stock mainly consists of these steel components and finished items. As at 31 October 2004, the total stock was valued at Sh. 6,048,000 out of total assets of Sh. 19,200,000. This stock figure was obtained by a physical count as at 31 October 2004, and valuation by reference to purchase invoices and manufacturing cost estimates. Required: With reference to each of the matters listed below, state the work you would do to conclude whether the amount attributed to stock is fairly stated;Cut-off procedures
Briefly explain the following terms as used in auditing: Vouching audit, Inherent risk, Control risk and in depth audit tests
Your are currently engaged in planning the audit of the payroll system of Ujenzi Ltd a manufacturing company, for the year ending 30 June 2005, Ujenzi Ltd‘s payroll system is fully computerized. Required: Explain three controls which should be instituted by Ujenzi Ltd to ensure that only authorized persons are allowed access to information on personal files and to input updates for the calculation of wages
A very important aspect of the audit of the financial statements by an external auditor is the observation of the physical stocktaking.Required: Why does the auditor need to attend a stock-take of the company that he audits?
List four advantages and four disadvantages of using the risk-based audit approach when auditing the financial statements of limited companies
A very important aspect of the audit of the financial statements by an external auditor is the observation of the physical stocktaking. Required: Explain the audit tests that the auditor would apply to establish the physical qualities of stock and their ownership
A very important aspect of the audit of the financial statements by an external auditor is the observation of the physical stocktaking. Required: List four procedures that an auditor would need to undertake prior to attending a company‘s stock-take
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One of the responsibilities of the directors of a company is to establish strong internal controls to safeguard the assets of the firm.Required:What procedures would you apply to verify the extension of a building that has been constructed by the client during the year?
List five limitations of an audit
Explain the following terms:Peer review;
K. Kemei want to buy a new car for G. N Motors Ltd. He selected a new and nice looking car and was informed by G. N. Motors Ltd that the car was new and free from any defects K. Kemei signed a sale agreement with the motor company which partly read “…..no condition or warranty that the vehicle is road worthy or as to its age orfitness for any purpose is given or implied by the seller. Goods once sold cannot be returne.”When the car was delivered to K. Kemei after paying for it, he discovered to his surprise that it was a second hand car of the same make as the car he had selected but with several major mechanical defects.G. N Motors Ltd. insists that he sale was validly concluded and that they cannot be liable to K. Kemei under any circumstances. Advise Kemei
Inventive Mind Co. Ltd. has developed a new drug to be used in the treatment of common cold. The directors wish to register the trademark for their new product. Outline the items which must be contained in the application form for registration in order for the trademark to be registered
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State the evidence, which you, as the auditor, would like to find in place and pay attention to when vouching the following payments made by RR Paper Mills Ltd., during the financial year ended 31 October 2002. Fire insurance premiums amounting to Sh. 10, 000 paid for the office block
You are the auditors of Mount Elgon Ltd. You are carrying out a review of the accounts for the financial year ended 31 October 2004 with a view of signing the audit report. During this review, you have noted the following matters: 1. No depreciation has been provided on plant and machinery for the financial year ended 31 October 2004. This is because the directors of Mount Elgon Ltd. feel that the value of the plant and machinery is in excess of the amount at which it is stated in the financial statements. 2. Some sections of the company‘s stocktaking records were accidentally destroyed. Consequently, the value attributed to stocks as at 31 October 2004 is only an estimation by the directors of Mount Elgon Ltd. Required: What would be your audit opinion with regard to the matter referred to in above and draft an audit report expressing your specific reservations with regard to (2) above
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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
Explain the following terms: Materiality;

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