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									CONFIDENTIAL                                  1                       MIA QE/ /MARCH 2011

                                                                                        Paper: Auditing & Assurance Services
                     QUALIFYING EXAMINATION

                  Auditing & Assurance Services

Date                      : 30 March 2011

Time                      : 9.30 am – 12.45 pm

Reading and Planning      : 15 minutes

Writing                   : 3 hours


This question paper contains 6 questions on 5 printed pages.

Answer ALL questions.

Answer questions 1,2 and 3 in separate booklet(s) from Questions 4, 5
and 6.

Do not open this paper until instructed by the invigilator.

During reading and planning time only the question paper may be annotated.
You must NOT write in your answer booklet until instructed by the invigilator.

           Examination Body

CONFIDENTIAL                                  2                       MIA QE/ /MARCH 2011


A.     The Malaysian Institute of Accountants (MIA) established a Practice Review
       Programme as part of their effort to regulate the accounting profession in Malaysia.
       All members in public practice and/or member firms offering audit services are
       required to undertake the programme.


       i.      Define the term “Practice Review”.

                                                                                    (2 marks)

       ii.     Explain any three (3) objectives of the Practice Review Programme.

                                                                                    (3 marks)

B.     The International Standards on Quality Control 1 (ISQC 1) is applicable to all firms in
       Malaysia that provide assurance and related services.


       i.      State the importance of quality control for assurance and related services.

                                                                                    (2 marks)

       ii.     Describe any three (3) elements of quality controls as defined by the
               International Standards on Quality Control 1 (ISQC 1).

                                                                                    (3 marks)
                                                                           (Total: 10 marks)


The auditor should carry out a substantive review of the financial statements components in
conjunction with the conclusions drawn from other audit evidences obtained to give him a
reasonable basis for his opinion on the financial statements.


i.     Describe any three (3) substantive procedures that auditor should adopt to verify
       each of the following assertions in relation to an entity’s property, plant and

       a.    Valuation;
       b.    Completeness; and
       c.    Rights and obligations.

                                                                                    (9 marks)

CONFIDENTIAL                                 3                       MIA QE/ /MARCH 2011

ii.    Describe any ten (10) substantive procedures that auditor should perform on the
       year-end account of the trade payables.

                                                                                  (10 marks)
iii.   Describe any six (6) audit procedures that auditor should adopt in respect of auditing
       accounting estimates.

                                                                                   (6 marks)
                                                                          (Total: 25 marks)


Besides providing statutory audit services, auditors can also provide other assurance
services covering a broad category of services including both financial and non-financial


i.     List any six (6) key items that would be included in the engagement letter for a
       Review Engagement of a client’s financial information.

                                                                                   (3 marks)

ii.    Discuss the differences between auditing, review of financial information and
       performing an agreed upon procedures services. Your discussion should include the
       objective, comparative level of assurance, level of engagement risk and the report to
       be provided by each of the assurance services.

                                                                                  (12 marks)
                                                                          (Total: 15 marks)


ISA 500 Audit Evidence requires auditors to design and perform audit procedures in such a
way to enable the auditor to obtain sufficient appropriate audit evidence to be able to draw
reasonable conclusions on which to base the auditor’s opinion.


i.     List and explain any four (4) audit procedures performed by the auditors in gathering
       audit evidence and give an example for each.

                                                                                   (6 marks)

ii.    Explain the following terms:
       a. Tests of controls
       b. Substantive procedures

                                                                                   (4 marks)
                                                                          (Total: 10 marks)
CONFIDENTIAL                                4                       MIA QE/ /MARCH 2011


A.   Analytical procedures are used at the planning, testing and review stages of an audit.


     Explain the term analytical procedures and its use at each of the stages mentioned

                                                                                    (8 marks)

B.   You are the audit manager in charge for the audit of Gosell Sdn Bhd, a distributor of
     health products for the year ended 30 September 2010. The company has been in
     operation for four years and the directors of Gosell has told you that this year the
     company has had a difficult year, due to a new regulation imposed by the
     government affecting the health products industry. For the purpose of performing the
     risk assessment procedures, you have been provided with the income statements for
     the last two financial years as shown below:

                                                         30 Sept         30 Sept
                                                            2010            2009
                                                         RM’000          RM’000
     Revenue                                               3,741           3,182
     Cost of sales                                         1,760           2,127
     Gross profit                                          1,981           1,055

     Operating expenses
     Administration                                          618             660
     Selling and Distribution                                491             344
     Interest payable                                         50              53
     Profit/(Loss) before tax                                822              (2)


     Using the information above, identify and explain the possible reasons for the
     changes in the income statement.

                                                                                 (12 marks)
                                                                         (Total: 20 marks)

CONFIDENTIAL                                 5                        MIA QE/ /MARCH 2011


A.   Guidance on going concern is given in ISA 570 Going Concern.


     i.      Compare the responsibilities of management, and of external auditors, in
             relation to the assessment of going concern.

                                                                                    (8 marks)

     ii.     Identify and explain any two (2) types of modified audit reports that can be
             issued where the going concern status of a company is called into question.
             Your answer should describe the circumstances in which they can be issued.

                                                                                    (4 marks)

B.   You are the audit manager responsible for performing reviews on audit files and are
     reviewing the going concern section of the audit file of Dowen Co, a client with
     considerable cash flow difficulties. The working papers indicate that Dowen Co is
     currently trying to raise finance to fund operating cash flows, and state that if the
     finance is not received, there is significant doubt over the going concern status of the
     company. You concluded that the going concern assumption is appropriate, but it is
     recommended that the financial statements should disclose the cash flow problems
     faced by the company, along with a description of the finance being sought, and an
     evaluation of the going concern status of the company. The directors do not wish to
     disclose the note in the financial statements


     i.      Explain any two (2) possible reasons why the directors of Dowen Co are
             reluctant to provide the note to the financial statements.

                                                                                    (4 marks)

     ii.     Discuss the implications for the audit report if the directors refuse to disclose
             the note.

                                                                                    (4 marks)
                                                                           (Total: 20 marks)

                              END OF QUESTION PAPER


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