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  • What is the form of audit opinion you would give if you concluded that the client company was experiencing going concern problems and: i. you have established...(Solved)

    What is the form of audit opinion you would give if you concluded that the client company was experiencing going concern problems and: i. you have established that the financial statements give sufficient disclosure of the going concern problems? ii. you have established that there is no disclosure of the going concern problems in the financial statements?

    Date posted: February 21, 2019.  Answers (1)

  • Explain five factors which would indicate to the auditor that the going concern assumption of the business entity he is auditing is threatened(Solved)

    Explain five factors which would indicate to the auditor that the going concern assumption of the business entity he is auditing is threatened

    Date posted: February 21, 2019.  Answers (1)

  • The National Metal Works Limited manufactures and retails door and window frames. The company recently dismissed their external auditors. The directors have approached your firm of accountants...(Solved)

    The National Metal Works Limited manufactures and retails door and window frames. The company recently dismissed their external auditors. The directors have approached your firm of accountants to act as their auditors and the directors have proposed a fee of KShs. 1,000,000 plus a bonus of 1% of profits after tax. Required: a) Describe the steps you would take before advising the partners of your firm whether to accept the appointment as auditors or not. b) State with reason whether professional auditors should accept the method of remuneration as proposed by the directors of the client company. c) Explain the implications of fixing the audit fee by negotiation between the directors and the external auditors on the independence of the auditor.

    Date posted: February 21, 2019.  Answers (1)

  • Inspection and monitoring of quality control by a firm of auditors involves both in-house and external procedures. The internal procedures include the post-audit review, sometimes known as...(Solved)

    Inspection and monitoring of quality control by a firm of auditors involves both in-house and external procedures. The internal procedures include the post-audit review, sometimes known as a ―cold review. The external procedures are sometimes known as ―external practice inspections or ―peer reviews Required: a) Write explanatory notes on the ―cold-review b) Explain the advantages and disadvantages of the ―peer review

    Date posted: February 21, 2019.  Answers (1)

  • Highlight six advantages of break-even charts.(Solved)

    Highlight six advantages of break-even charts.

    Date posted: February 21, 2019.  Answers (1)

  • Daiton Ltd. manufactures four products; AA, BB, CC and DD. The budgeted income statement for the month of June 2012 is as follows:(Solved)

    Daiton Ltd. manufactures four products; AA, BB, CC and DD. The budgeted income statement for the month of June 2012 is as follows: rh2212019439.png aacc.png Required; a) Calculate the shortfall in the hours available. b) Rank the products in order of priority based on the contribution per hour. c) Advise the management on the most profitable product mix. d) The management of Daiton Ltd. is considering whether to discontinue the manufacture of product BB which is' expected to realize a loss in June 2012. Advise the management whether product BB should be discontinued from production, citing two reasons for your advice.

    Date posted: February 21, 2019.  Answers (1)

  • Control procedures consist of practices and procedures in addition to the control environment, established to achieve certain specific objectives. For each of the procedures listed below, explain...(Solved)

    Control procedures consist of practices and procedures in addition to the control environment, established to achieve certain specific objectives. For each of the procedures listed below, explain the purpose of the control procedures and state the tests of control you would perform to confirm that the control objective was being achieved a) The preparation of a reconciliation statement. b) The maintenance of a fixed assets register. c) The existence of passwords in a micro-computer accounting system

    Date posted: February 21, 2019.  Answers (1)

  • Jino Ltd. produces four products namely; A, B, C and D. The following are the firm's budgeted figures for the month of July 2013(Solved)

    Jino Ltd. produces four products namely; A, B, C and D. The following are the firm's budgeted figures for the month of July 2013 dop2212019433.png Additional Information: 1. Material costs is sh. 10 per kilogramme and the maximize firm has a total of 500 kilogramme 2. Labour is paid at sh. 10 per hour and is limited to 360 hours Required;- a) Determine the limiting factor b) Calculate the production mix that would maximize profit for the month

    Date posted: February 21, 2019.  Answers (1)

  • Many auditors now use laptops computers to perform various audit tasks. However, if audit firms use laptop computers they risk data being corrupted and appropriate controls...(Solved)

    Many auditors now use laptops computers to perform various audit tasks. However, if audit firms use laptop computers they risk data being corrupted and appropriate controls must therefore be put in place to prevent the corruption of data. a) Explain six ways which auditors can use laptop computers in their audit work (other than computer-assisted audit techniques). b) Explain the computer assisted audit techniques listed below: i. Embedded audit facilities. ii. Integrated test facilities. c) Briefly describe two types of software that might be used by auditors in their work other than Computer Assisted Audit techniques. d) Describe the controls that auditors should implement when using laptop computers on audits.

    Date posted: February 21, 2019.  Answers (1)

  • Agnes Kaseo and Peter Poah, decided to venture into the same business in the year 2012. They sell the same type product in the same type...(Solved)

    Agnes Kaseo and Peter Poah, decided to venture into the same business in the year 2012. They sell the same type product in the same type of market. They have provided the following budgeted income statement for the year ending 30 June 2014: sq2212019424.png qwe2212019426.png Required: Income statement for the month of April 2013 using: i) Absorption costing. ii) Marginal costing

    Date posted: February 21, 2019.  Answers (1)

  • One of the responsibilities of the directors of a company is to establish strong internal controls to safeguard the assets of the firm.(Solved)

    One of the responsibilities of the directors of a company is to establish strong internal controls to safeguard the assets of the firm. Required: a) State the audit objectives of internal controls on fixed assets. b) Set out the audit procedures you would follow to verify directors‘ fees. c) What procedures would you apply to verify the extension of a building that has been constructed by the client during the year?

    Date posted: February 21, 2019.  Answers (1)

  • An auditor is required to state whether, in his opinion proper books of account have been kept and whether the financial statements give a true and...(Solved)

    An auditor is required to state whether, in his opinion proper books of account have been kept and whether the financial statements give a true and fair view of the state of the financial affairs of the company being audited. What are the consequences, to the auditor, for giving an unqualified opinion, when he knows that there are material inaccuracies in financial statements

    Date posted: February 21, 2019.  Answers (1)

  • Neb Ltd. manufactures three products namely; A, B and C which use the same inputs but in different quantities. In addition to these inputs, each unit of...(Solved)

    Neb Ltd. manufactures three products namely; A, B and C which use the same inputs but in different quantities. In addition to these inputs, each unit of product C uses a component MT200 which the company currently purchases from an external supplier for Sh.80 per unit. The following estimated data relates to the month of January 2014: mt2212019411.png Additional information: 1. The monthly fixed costs amount to Sh. 150,000. 2. The company has reverse engineered the component MT200 and has realized that it could make the component in-house at the following costs per unit: Sh. fft.png 3. In the month of January 2014, the maximum availability of skilled labour is 5,400 hours but all other resources are readily available 4. There would be no incremental fixed costs incurred as a result of making the component in house. 5. The company bases all short-term decisions on profit maximization. 6. The company would either buy the component or make it in-house; it would not use a mixture of the two options: Required: Advise the management of Neb Ltd. on the optimal production plan for the month of January 2014.

    Date posted: February 21, 2019.  Answers (1)

  • Your client, ABC Ltd. has a system for inputting purchase and expense invoice where the operator inputs the following from each item.(Solved)

    Your client, ABC Ltd. has a system for inputting purchase and expense invoice where the operator inputs the following from each item. -Order number (a code 2221 is used for items like electricity) -Supplier name -Supplier code number -First four letters of nominal account name (entered on invoice by purchase department manager) -Nominal account code (entered by purchase department manager) Date -Goods inward note -number Net amount -VAT amount -Gross amount Required: a) Suggest manual operation and controls which might previously have applied to these invoices. b) Suggest input controls that might be applied by the program to these items. c) List some audit tests that could be applied to these items indicating the purpose of each test and the relevant audit evidence obtained.

    Date posted: February 21, 2019.  Answers (1)

  • Tec Ltd. manufactures a single product branded 'Zed' for sale on the local and international market. The cost structure per unit of product 'Zed' is as follows:(Solved)

    Tec Ltd. manufactures a single product branded 'Zed' for sale on the local and international market. The cost structure per unit of product "'zed' is as follows: kg2212019405.png Additional information: 1. The current sales level for the company amounts to Sh. 800,000. 2. The fixed overheads per unit have been calculated based on the current sales level of 4,000 units. Required: i) Sales price per unit. ii) Current profit or loss. iii) Break even point in units and shillings. iv) Suggest four measures that could be taken to improve the current profit position

    Date posted: February 21, 2019.  Answers (1)

  • Wanga Ltd. manufactures a wide range of products. The company has approached you for advice on an order for a product branded 'Venzo'. This is a...(Solved)

    Wanga Ltd. manufactures a wide range of products. The company has approached you for advice on an order for a product branded "Venzo". This is a one-off order. The costs associated with the order are as follows: tpl2212019359.png Additional information: 1. Material A: The cost of Sh.10 per kilogramme is the original purchase cost incurred several years ago. This material is no longer in use by the business and if not used for this order, it would be sold as scrap at Sh.3 per kilogramme. 2. Material B: This is in continuous use by the business. The historical cost of the material was Sh.7 per litre although current supplies are being purchased at Sh.6.50 per litre. 3. Material C: Wanga Ltd. has 600 kilogrammes of this material in stock and new supplies would cost Sh 4 per kilogramme. If the current stock of this material is not used for the order, it would be used as a substitute for Material Z which cost Sh.7 per kilogramme in another production process. 2 kilogrammes of Material Care substituted with I kilogramme of Material Z. 4. Department X: This department has spare labour capacity sufficient for the order which would be retained within the department. 5. Department Y: This department is currently working at full capacity. The existing staff could either work overtime to complete the order, paid at 150% of normal rate or Wanga Ltd. could divert labour hours from the production of other units that currently average a contribution of Sh.3 per labour hour. 6. Overheads: These are absorbed at a pre-determined rate. There will be no incremental costs incurred as a result of accepting this order. Required: i. Advise the management of Wanga Ltd. on the minimum price that they should accept for product 'Venzo'. ii. Justify your treatment of each cost as either relevant or irrelevant as applicable in each case.

    Date posted: February 21, 2019.  Answers (1)

  • 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...(Solved)

    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: a) Outline the purpose of a letter of representation from management to the auditor. b) Draft a paragraph for a letter of representation appropriate to the circumstances described above. c) Outline the audit work which should be performed when seeking evidence to substantiate the management‘s representations as drafted and indicated the value of the directors‘ representations in these circumstances. You should present your answer under the following headings: - Existence and title. - Valuation. - Disclosure d) State what action you would take if the directors refused to provide you with a letter of representation

    Date posted: February 21, 2019.  Answers (1)

  • Tamu Ltd. manufactures three products namely; Exe, Wye and Zed. The following information relates to the company's budget for the first quarter of the financial year...(Solved)

    Tamu Ltd. manufactures three products namely; Exe, Wye and Zed. The following information relates to the company's budget for the first quarter of the financial year ending 31 December 2015: osh2212019353.png Additional information;- 1. The above budget is based on full production capacity. 2. The factory manager proposes that if the whole production capacity was used to produce each product in turns, then at any given time, 24 units of Exe, 12 units of Wye and 9 units of Zed could be manufactured and that production switching costs would be negligible. 3. The sales manager reports that the maximum sales will be as follows: wyn2212019355.png

    Date posted: February 21, 2019.  Answers (1)

  • Sifa Ltd. manufactures and sells a single product. The following information regarding the company for the year ended 31 October 2014 is provided:(Solved)

    Sifa Ltd. manufactures and sells a single product. The following information regarding the company for the year ended 31 October 2014 is provided: fik2212019347.png The following changes are expected to occur during the year ending 31 October 2015: 1. Variable selling and distribution expenses will reduce by 5% due to increased efficiency of the sales staff. 2. Variable overheads will increase by 3%. 3. Labour cost will reduce by 4%. 4. Material cost will increase by 2% due to inflation. 5. Selling price will reduce by 3% in order to attract customers. 6. No stock is expected at the end of the period. Required;- i) Expected break even sales for the year ending 31 October 2015. ii) Expected margin of safety in sales value for the year ending 31 October 2015. iii) Expected sales value at which a profit of Sh.2, 250,000 will be realised. iv) A summary of the operating statement to show net profit in (b) (iii) above.

    Date posted: February 21, 2019.  Answers (1)

  • List three disadvantages of using standardized audit programmes and how these disadvantages can be avoided.(Solved)

    List three disadvantages of using standardized audit programmes and how these disadvantages can be avoided.

    Date posted: February 21, 2019.  Answers (1)

  • Kenya Industrial Chemical limited (KICL) produces an industrial chemical branded Alpha. During the production process a by-product Beta and a toxic waste T are also produced. During...(Solved)

    Kenya Industrial Chemical limited (KICL) produces an industrial chemical branded Alpha. During the production process a by-product Beta and a toxic waste T are also produced. During the month of October 2005, KICL recorded the following information in relation to the production process. alpha2212019338.png Additional Information: 1. The toxic waste T is produced at the final production stage. KICL incurs sh. 80 to dispose of a litre of T 2. Beta is transferred to a subsequent operation where it is packed at a cost of sh.25 per litre This cost has not been included in the direct materials and conversion costs shown above. During the month of October 2005, 300 litres of Deta were sold at a retail price of sh. 75 per litre 3. If is the company's policy to credit the account with the net realizable value of Beta produced 4. The normal output from the production process per 10,000 litres of direct materials is; tp2212019341.png Required: a) Prepare the following accounts for the month of October 2005 i. Process account ii. By-product iii. Normal loss account (toxic waste) iv. Abnormal loss account (toxic waste) b) Determine the abnormal gain or loss products A,B

    Date posted: February 21, 2019.  Answers (1)

  • 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...(Solved)

    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: a) 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. b) Explain your judgment on the reliability of the audit evidence obtained in five ways listed above.

    Date posted: February 21, 2019.  Answers (1)

  • a) Distinguish between a by-product and joint product and briefly explain the accounting treatment of each b) Jitegemee limited company uses a process costing system in its...(Solved)

    a) Distinguish between a by-product and joint product and briefly explain the accounting treatment of each b) Jitegemee limited company uses a process costing system in its operation. In one of the production processes, two joint products A and B and a by-product C are produced The following additional information is provided: 1. Each processing run requires 12,500 kilograms of output.the costs incurred are as follow:- color2212019330.png 2. It is expected that 20% of the input will be damaged in the production process. This is sold as scrap at sh. 10 per kilogram. The damaged items are detected at the end of the production process. 3. The output from the production process is as follows:- gram2212019332.png 4. Product A has to be processed further at a cost of sh. 100 per kilogram before sale 5. The joint costs are allocated to the products on the basis of net releasable value Required: i. Determine the total cost of the output from the production process ii. Calculate the allocated joint costs for product A and product B iii. Prepare a process account for the production process above

    Date posted: February 21, 2019.  Answers (1)

  • Under what circumstances is one ineligible for appointment as an auditor of a company?(Solved)

    Under what circumstances is one ineligible for appointment as an auditor of a company?

    Date posted: February 21, 2019.  Answers (1)

  • Go easy Limited crushes and refines mineral one into three products in a joint cost operation. Costs and production for 1991 were as follows:-(Solved)

    “Go easy” Limited crushes and refines mineral one into three products in a joint cost operation. Costs and production for 1991 were as follows:- Department X: Initial joint costs sh. 2,100,000 producing 100,000 kilograms of Alco, 300,000 kilograms of Devo and 500,000 kilograms of Holo Department Y: Processes Alco further at a cost of sh. 500,000 Department Z: Processes Devo further at a cost of sh. 1,000,000 Results 1991 Alco 180,000 kilograms completed; 95,000 kilograms sold for sh. 100 per kilogram; Final inventory 5,000 kilograms Devo: 300,000 kilograms completed; 295,000 kilograms sold for sh. 30 per kilogram; final inventory 5,000 kilograms Holo: 500,000 kilograms completed; 495,000 kilograms sold for sh. 5 per kilograms; final inventory 5,000 kilograms; Holo required no further processing Required: a) Use the net realizable –value method to allocate the joint costs of the three products b) Compute the total costs and unit costs of ending inventories

    Date posted: February 21, 2019.  Answers (1)

  • You have received a request form XYZ Ltd. to accept an appointment as their auditor for the financial year ending 31 December 2001(Solved)

    You have received a request form XYZ Ltd. to accept an appointment as their auditor for the financial year ending 31 December 2001 Required: a) Explain the preliminary procedures you would carry out upon your appointment. b) What is the importance of a preliminary review? c) Why is it important for the auditor to hold discussions with the client‘s senior staff? d) State why it is important for an incoming auditor to hold consultations with the outgoing auditor.

    Date posted: February 21, 2019.  Answers (1)

  • The West Africa Industries Limited buys crude vegetable oil: The refining of these oils results in four products A, B and C which are liquids and...(Solved)

    The West Africa Industries Limited buys crude vegetable oil: The refining of these oils results in four products A, B and C which are liquids and D which is a heavy residue. The cost of the oil refined in 1992 was sh. 1,104,000 and the refining department had total processing costs of sh. 2,800,000. The output and sales for the four products in 1992 were as follows:- edr2212019322.png Required: a) Assume that the next realizable value of allocating joint is used. What is the net income for products A, B C and D? Joint cost total sh. 3,904,000 b) The company has been tempted to sell at split-off directly to other processors. If the alternative had been selected, sales per litre would have been A, sh. 150, B sh. 5, C sh. 8 and D sh.30. What would the net income be for each product under these alternatives?

    Date posted: February 21, 2019.  Answers (1)

  • The following informationis obtained in respect of process 2 of the month of September;(Solved)

    The following informationis obtained in respect of process 2 of the month of September; degree.png There was a normal loss in the process of 10% of production units' scrapped realized sh. 50 per unit, use FIFO method Required: i. Statement of production ii. Statement of cost and evaluation iii. Process account iv. Abnormal loss / gain account

    Date posted: February 21, 2019.  Answers (1)

  • You have been appointed the auditor of United Millers Company Limited, a medium manufacturing company which is quoted on the stock exchange.(Solved)

    You have been appointed the auditor of United Millers Company Limited, a medium manufacturing company which is quoted on the stock exchange. Required: a) List the important matters which must be included in the letter of engagement. b) Explain the purpose of such a letter

    Date posted: February 21, 2019.  Answers (1)

  • a) Calculate the cost of completed units transferred to process 3 b) Calculate the value of closing WIP c) Show (i) Process 2 account (ii) Abnormal Gain account(Solved)

    ddo2212019309.png Required: a) Calculate the cost of completed units transferred to process 3 b) Calculate the value of closing WIP c) Show (i) Process 2 account (ii) Abnormal Gain account

    Date posted: February 21, 2019.  Answers (1)


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