Accounting Business Internal Control System of Al Khadar Manufacturer HW The assignment need to answer the in the prescribed number of words as mentioned i

Accounting Business Internal Control System of Al Khadar Manufacturer HW The assignment need to answer the in the prescribed number of words as mentioned in the assignment.

To follow the following format while preparing the assignment :

Font Style: Times New Roman

Font Size: 12 point for body and 14 point for Headings

Line Spacing: 1.5

Margin: 2.54cm (One inch) on all the sides

Page Number : At the bottom right hand corner of each page Colour: All words should be in black colour. Answers to each Question should not be less than 100 Words
Version 4
Scenario 1
Al Khadar (Wood) manufactures engineering parts. The site for the company is spread across
Sultanate of Oman.
Purchasing System:
When a development is in need of products, a request is forwarded to the Order Department.
The clerk in the Ordering Department prepares a Purchase Order and contacts suppliers and
checks out for the one who can despatch goods at the earliest. Purchase Order is forwarded
to so selected customer, which are not sequentially numbered and only orders above RO.
6,000 require authorisation.
Purchase Invoices are maintained by the purchase ledger clerk, who is an experienced team
member, but does not apply any application controls over the input process. Every week he
updates the purchases ledger from the purchase book, which is then posted manually to the
purchase ledger.
Payment System:
Al Khadar maintains many current and savings accounts. As regards the current account
reconciliation is done weekly, but for the savings account there is only reconciliation every
two months.
To have the maximum cash and bank balances, Al Khadar has the policy of delaying payments
to creditors. The Director of Finance is given the full responsibility of authorising and
processing payments as such he is provided with the total amount of payments, which are
made through bank transfers.
Question 1:
(i) Explain 5 problems in the Internal Control system Al Khadar (Wood) Manufacturer.
(2.5 Marks)
(ii) Provide recommendations to address each problem.
(2.5 Marks)
Page 3 of 7
Scenario 2
Sarah Boutique Manufacturer of Bridal dress sells expensive dress and ready-made bridal
costumes. The business was developed by its Director Ms. Sarah Hussain. Internal control
system of the company ensures checks on the day to day transactions which operate
continuously as a part of the routine system where a
work is being proved
independently or is complimented by the other. E & Y Audit Firm is re-appointed as auditors
in Sarah Boutiques for a year ended 31st March 2018. The overall level of acceptable audit
risk of the client is considered as 20%. The inherent risk and control risk are assessed at 40%
and 70% respectively.
Question 2:
(i) Explain the meaning of 20% level of Audit Risk.
(1 Mark)
(ii) Calculate the detection risk from the case let using the audit risk model and discuss on
the same.
(2 Marks)
(iii) Calculate the detection risk, if the audit risk falls down to 5% and how would the
audit work be affected by the change.
(2 Marks)
Scenario 3
Zaheer Leather Manufacturing is located in Muscat, Sultanate of Oman. Zaheer
Manufacturing was established in 2010 and has since been leading Oman Leather
Manufacturer, producing diverse range of Ladies Hand Bags, Wallets, Belts and Gloves.
Recently Zahe L a
Ma a
Pa
ZLM La
Ba a
ba
with USB Charger for the Laptops.
The following is the summary of the year end receivables balances of Zaheer Leather
Manufacturing and the equivalent figures for the previous year. Performance materiality has
been set at RO. 4,000.
Customer
Arshad
Anas Ismail
Faujad
Naufal
Riaz
Other Customers all with balance under RO. 1,000
2017
4,000
5,000
7,000
1,500
3,000
10,000
———–30,500
=======
2016
4,000
3,000
6,000
2,000
8,000
8,000
———–31,000
========
Question 3:
(i) Set out which of the above balances as a minimum, the auditor should select for listing
and explain. Why?
(3 Marks)
(ii) Discuss the concept of Materiality Level with reference to the case let.
(2 Marks)
Page 4 of 7
Scenario 4
As the Audit Manager of Acumen Company, you are preparing an audit engagement letter for
the Audit of Zahra Medical Company for the year 2015.
Acumen provides audit taxation and management consultancy advice to Zahra Medical
Company, who has been your audit client over 5 years. The company has offered a job for
your son Mr. Majeed, as the Sales Manager which alternatively allows him to have a part
share in the stock capital of the company.
Question 4:
Discuss five ethical threats which may affect the independence of Acumen Company in the
audit work (in line with Code of Ethics).
(5 Marks)
Scenario 5
Core Audit team was invited to conduct the audit of Blueberry SAOG for the year 2016-17.
The team had Mr. Adil as the main auditor and Mr. Hameed the sub auditor. As a part of the
audit process the financial statements of the company was analysed and had conflicting views
as to the audit opinion to be issued on the situations. Mr Hameed felt that all situations can
have an unqualified / a qualified opinion while Mr. Adil had a different view on certain
situations and had plans to provide an adverse /disclaimer opinion:
a. Long term investments made by the corporation are reflected as short term.
b. In spite of having clear indications that the corporation may not be a going concern
adequate measures are not taken to mitigate the problem.
c. Where no other evidences are least expected to exist, the management has refused to
furnish written representation.
d. The policy for revenue recognition has been changed by the corporation which is not at
par with the International Accounting standards which has a material and pervasive
effect on the financial statements.
e. In spite of having clear indications that the corporation may not be a going concern
adequate disclosure is not given in the financial statements.
Question 5:
(i) Analyse the following situations and identify the audit opinion to be issued in each
case.
(2.5 Marks)
(ii) Justify your answer and indicate the team you support with reasons.
(2.5 Marks)
Page 5 of 7
Scenario 6
Mr. Anwar Shah, the auditor of Namma Oil Refinery Company has issued the following.
a. Disclosures given as notes to financial statements relating to transactions with related
parties relate to the audit entity and have occurred in the business
b. Balances and party transactions that need to be disclosed in the financial statements are
disclosed as footnotes.
c. Disclosures in footnotes of financial statements include nature of related party
transactions, events and balances.
d. Financial statements properly disclose all expenses in the comprehensive income
statement
e. Stock purchases before the end of the current year on credit are included in the
Purchases.
Question 6:
Identify and explain the related the Assertions and Audit objectives.
(5×1=5 Marks)
Scenario 7
Ms. Samira, after completing her schooling in Salalah, decided to join a Private College to
obtain her Diploma Certificate in Accounting. Being the only child of her aged parents, she
was very eager to find a job as she had her intentions of supporting her aged parents. During
the process of her job hunt, two job offers opened before Ms. Samira, one as a Jr. Accountant
in Al Waleed LLC and the other as an Assistant in Zahira Audit Company. Though the income
part of the jobs were not very lucrative, Ms. Samira was only concerned with gaining
experience as she was sure of her future as an experienced Accountant/Auditor.
Question 7:
Explain to Ms. Samira five features of the Profession in Al Waleed LLC.
Marks)
(5
Scenario 8
Mr. Wassim Khan is the chief auditor of Khan Audit team. For the year 2018, the team is
invited to conduct the audit of S a H e To verify the revenue for the client the audit
team used the product of occupied rooms with the standard room rate and number of days
in the period.
Question 8:
Identify and explain the category and type of audit test discussed above.
(5 Marks)
Page 6 of 7
Scenario 9
Mr. Khader Khan is the chief auditor of Khader and Khader Audit Team. Recently the team is
invited to conduct the external audit of Oman Oil and Gas SAOG. A true and fair report has to
be prepared on the client company. The client company Oman Oil and Gas SAOG has
employed the internal control measures to all activities and processes concerned.
Question 9:
List and explain any 5 elements included in an unmodified audit report with reference to
Oman Oil and Gas SAOG.
(5 X 1= 5 Marks)
Question 10
Discuss on the recommendations which can pave the way to improve the internal control
system of Oman Oil and Gas SAOG.
(5×1=5 Marks)
Page 7 of 7

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