The following methods of defalcation or fraud by employees are sometimes encountered.

  1. Dummy names on payrolls (6 marks)
  2. Teeming and lading (7 marks)
  3. Fictitious credit notes or sales return payments for fictitious purchases. (7 marks)

(Total 20 Marks)


What normal audit procedure would be likely to disclose each of such irregularities?

The principal objective of the verification of liabilities and commitments is to form an

opinion as to their completeness, existence, valuation and presentation in the financial



  1. Why is it essential for the auditor to examine statements received from suppliers of goods and services? (5 marks)
  2. What procedures would the auditor follow to obtain assurance that at the year-endall goods received on credit by the client are included both in inventories and creditor balances. (5 marks)
  3. How would the auditor ensure that the amounts accrued for wages and salaries due but unpaid were properly compiled? (5 marks)
  4. What tests would the auditor need to undertake to ensure that capital commitments at year end were fairly stated? (5 marks)

(Total 20 Marks)


You are the auditor of Quick Meals Ltd. a company which operates a restaurant in the middle of the city. Every five years the premises are completely renovated and the company created a provision in the accounts so as to charge the expense to accounting periods in a consistent manner. You are reviewing the accounts for the year following the most recent renovation.

  1. Define the words ‘provision’ and reserve. (6 marks)
  2. Draft a paragraph for the statement of accountancy policies which would explain the provision to persons not familiar with accounting (6marks)
  3. What steps would you take this year to satisfy yourself that the provision for renovation was properly stated? (8 marks)

(Total 20 Marks)


a) What is meant by the term verification? (4 marks)

b) Explain how you would verify the following items appearing in the balance sheet:

i. Ordinary share capital - Shs.150 million. (4 marks)

ii. Capital and revenue reserves - Shs.25 million. (4 marks)

iii. Share premium Shs.5 million . (4 marks)

iv. Long term loans from the bank- Shs.10 million. (4 marks)

(Total 20 Marks)


a) What are post balance sheet events? (4 marks)

b) What procedures would you carry out in order to obtain appropriate knowledge

of the post balance sheet events? (10 marks)

c) State the action, if any, that an auditor is required to take regarding the post

balance sheet events. (6 marks)

(Total 20 Marks)


Going concern concept is one of the fundamental assumption underlying the preparation of financial statements. What are the procedures you would perform to ensure that the going concern is still appropriate to your clients. (10 marks)

(Total 10 Marks)


a) Explain why auditors carry out circularisation of debtors. (6 marks)

b) Distinguish between positive and negative debtors circularisation procedures. (2 marks)

c) Describe in detail the work you would carry out in scrutinising the replies to the debtors circularisation and in confirming whether the debtors balance are collectible in the following situations:

i. Where the debtor does not agree with the balance & states a difference. (2 marks)

ii. Where the debtor reports that he cannot confirm the balance. (2 marks)

iii. Where no reply is received from the debtor. (4 marks)

iv. List the stages of a debtors circularisation. (4 marks)

(Total 20 Marks)


a. What indications on factors might the auditor observe that would cast doubts on the appropriateness of the going concern of a client business? (8 marks)

b. List counter indications that might exist in a business to overcome the problems in

a) above. (4 marks)

c. State what steps you would take to ensure that the concept of going concern was applicable to the client you are about to audit. (8 marks)

(Total 20 Marks)


a) Define the term audit programme (2 marks)

b) Write in point form an audit programme to cover salary and wages of a small size firm. (8 marks)

c) Outline the procedures you would carry out in the verification of Creditors (10 marks)

(Total 20 Marks)