Audit Limitations

AA – Nov 2022 – L2 – Q5 – Internal Audit Necessity

Explanation on internal audit necessity, maintaining independence, and internal audit limitations.

Question

In the apex bank‟s regulatory supervisory report to Dutse Bank Limited, the management has been directed to ensure institution of an Internal Audit Unit. Prior to this time, the bank believed that internal audit staff might be colluding with other staff to suppress information on fraudulent transactions and as such the desired result might not be achieved. Apart from this, it was considered that savings could be made from transport, hotel and other allowances to be paid to staff when on official assignments. The independent auditor had earlier mentioned the need for this in the audit report but management was of the view that it is acceptable to cross-train employees in different departments to be able to audit departments other than their own. In the opinion of management, this
will provide a more independent and unbiased view through checks and balances. The audit function they perform through multitasking will best add value to the progress of the organisation. It is also the belief of management that the basic processes of both accounting and auditing are similar. The two systems use essentially the same procedures and techniques of bookkeeping, computation and analysis. To them, accounting and auditing strive to ensure that the financial statements and records provide a fair reflection of the actual financial position of an organisation. Both activities are inter-related and go hand in hand, especially in setting up processes in the organisation, hence, there is no need for any Internal Audit Unit or duplication of efforts.
As the independent auditor of the bank, you were shown the regulatory supervisory report and you have been asked to make presentation to the Board of Directors on the necessity for the Internal Audit Unit in the bank.
Required:

a. Explain the need for the internal audit functions in an organisation. (5 Marks)
b. State the various measures that can be taken to protect the independence of internal auditors. (5 Marks)
c. Explain the weaknesses and limitations of internal audit. (5 Marks)

Answer

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Tags: Audit Independence, Audit Limitations, Corporate Governance, Internal Audit
Level: Level 2

Topic: Independence of Internal Auditors, Internal Audit Functions, Limitations of Internal Audit
Series: NOV 2022

AA – May 2017 – L2 – SC – Q7 – Audit-related services

Examination of analytical comparisons, precautions in substantive testing, and limitations of ratio analysis in auditing.

Question

One essential feature of analytical procedures in auditing is ‘comparison’. The auditor will calculate key relationships between figures (non-financial figures as well as financial figures) and then make comparisons.

You are required to:

(a) Identify FOUR areas of comparison when using analytical procedures and explain their purpose. You could tabulate your answers. (8 Marks)
(b) List FOUR precautionary steps the Auditor is required to take before using analytical procedures in substantive testing. (4 Marks)
(c) Describe THREE limitations of ratio analysis in its use in substantive testing. (3 Marks)

Answer

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Tags: Analytical procedures, Audit Limitations, Comparison, Ratios, Substantive Testing
Level: Level 2

Topic: Audit-related services
Series: MAY 2017

AA – July 2023 – L2 – Q2c – Audit Failure and Expectation Gap, Regulatory Framework and Audit Responsibilities

Identification of inherent limitations of audit and misconceptions regarding the role of an auditor.

Question

c) Reasonable assurance is the highest level of assurance auditors may provide. However, due to the limitations of auditing, it is impossible to guarantee ‘absolute’ assurance. Some users of financial statements, however, have the misconception that an audit provides absolute assurance and that the audit opinion guarantees that the financial statements are ‘accurate.’ The ‘Expectations Gap’ refers to these and other misunderstandings regarding the work of an auditor.

Required:
i) State FOUR (4) inherent limitations of an audit that makes it impossible to provide ‘absolute’ assurance.

(6 marks)
ii) State THREE (3) misconceptions about the role an auditor plays. (4 marks)

Answer

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Tags: Audit Expectations, Audit Limitations, Misconceptions, Reasonable Assurance
Level: Level 2

Topic: Audit Failure and Expectation Gap, Regulatory Framework and Audit Responsibilities
Series: JULY 2023

AA – Dec 2022 – L2 – Q3b – Audit and Assurance Evidence

Explains four limitations of using ratio analysis in auditing and their impact on financial statement assertions.

Question

You have been presented with the Financial Statements of Asiki Ltd, an audit client that has been consistent in reporting good financial performance. As part of obtaining audit evidence your Audit Manager has asked you to perform analytical procedures on the company’s General and Administrative Expenses using ratio analysis.

Required:
Explain to the Audit Manager FOUR (4) limitations of ratio analysis and how these could impact on assertions.

Answer

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Tags: Analytical procedures, Audit Limitations, Financial Statements, Ratio Analysis
Level: Level 2

Topic: Audit and Assurance Evidence
Series: DEC 2022

AA – May 2019 – L2 – Q1b – Audit and Assurance Evidence

Discusses the advantages of auditor independence and the inherent limitations of auditing.

Question

b) The Institute of Chartered Accountants (Ghana) is organizing a continuous professional development program on the code of conduct for members and other relevant issues pertaining to audit. You are the audit partner of Lankai and Co, a firm of Chartered Accountants, and you are to present a paper on the independence of the auditor and the inherent limitations of auditing.
Required:
i) Explain TWO (2) advantages of independent audit.
(3 marks)
ii) The phrase “the auditor must be seen to be independent both in fact and appearance.”
(3 marks)
iii) Inherent limitations of audit.
(4 marks)

Answer

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Tags: Audit Limitations, Auditor Independence, Ethical Principles, Professional Skepticism
Level: Level 2

Topic: Audit and Assurance Evidence
Series: MAY 2019

AA – April 2022 – L2 – Q2a – Regulatory Framework and Audit Responsibilities

Identify the rights of an auditor and actions when rights are denied.

Question

The Companies Act, 2019 (Act 992) gives the auditor some rights.

Required:
i) Identify FOUR (4) rights of an auditor. (6 marks)
ii) Explain TWO (2) actions auditors may take when some of the rights are denied. (4 marks)

Answer

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Tags: Actions, Audit Limitations, Auditor Rights, Companies Act
Level: Level 2

Topic: Regulatory Framework and Audit Responsibilities
Series: APR 2022

AA – Nov 2022 – L2 – Q5 – Internal Audit Necessity

Explanation on internal audit necessity, maintaining independence, and internal audit limitations.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Independence, Audit Limitations, Corporate Governance, Internal Audit
Level: Level 2

Topic: Independence of Internal Auditors, Internal Audit Functions, Limitations of Internal Audit
Series: NOV 2022

AA – May 2017 – L2 – SC – Q7 – Audit-related services

Examination of analytical comparisons, precautions in substantive testing, and limitations of ratio analysis in auditing.

Question

You are required to:

(a) Identify FOUR areas of comparison when using analytical procedures and explain their purpose. You could tabulate your answers. (8 Marks)
(b) List FOUR precautionary steps the Auditor is required to take before using analytical procedures in substantive testing. (4 Marks)
(c) Describe THREE limitations of ratio analysis in its use in substantive testing. (3 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Analytical procedures, Audit Limitations, Comparison, Ratios, Substantive Testing
Level: Level 2

Topic: Audit-related services
Series: MAY 2017

AA – July 2023 – L2 – Q2c – Audit Failure and Expectation Gap, Regulatory Framework and Audit Responsibilities

Identification of inherent limitations of audit and misconceptions regarding the role of an auditor.

Question

Required:
i) State FOUR (4) inherent limitations of an audit that makes it impossible to provide ‘absolute’ assurance.

(6 marks)
ii) State THREE (3) misconceptions about the role an auditor plays. (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Expectations, Audit Limitations, Misconceptions, Reasonable Assurance
Level: Level 2

Topic: Audit Failure and Expectation Gap, Regulatory Framework and Audit Responsibilities
Series: JULY 2023

AA – Dec 2022 – L2 – Q3b – Audit and Assurance Evidence

Explains four limitations of using ratio analysis in auditing and their impact on financial statement assertions.

Question

Required:
Explain to the Audit Manager FOUR (4) limitations of ratio analysis and how these could impact on assertions.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Analytical procedures, Audit Limitations, Financial Statements, Ratio Analysis
Level: Level 2

Topic: Audit and Assurance Evidence
Series: DEC 2022

AA – May 2019 – L2 – Q1b – Audit and Assurance Evidence

Discusses the advantages of auditor independence and the inherent limitations of auditing.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Limitations, Auditor Independence, Ethical Principles, Professional Skepticism
Level: Level 2

Topic: Audit and Assurance Evidence
Series: MAY 2019

AA – April 2022 – L2 – Q2a – Regulatory Framework and Audit Responsibilities

Identify the rights of an auditor and actions when rights are denied.

Question

The Companies Act, 2019 (Act 992) gives the auditor some rights.

Required:
i) Identify FOUR (4) rights of an auditor. (6 marks)
ii) Explain TWO (2) actions auditors may take when some of the rights are denied. (4 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Actions, Audit Limitations, Auditor Rights, Companies Act
Level: Level 2

Topic: Regulatory Framework and Audit Responsibilities
Series: APR 2022

Question Tag: Audit Limitations

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AA – Nov 2022 – L2 – Q5 – Internal Audit Necessity

Explanation on internal audit necessity, maintaining independence, and internal audit limitations.

AA – May 2017 – L2 – SC – Q7 – Audit-related services

Examination of analytical comparisons, precautions in substantive testing, and limitations of ratio analysis in auditing.

AA – July 2023 – L2 – Q2c – Audit Failure and Expectation Gap, Regulatory Framework and Audit Responsibilities

Identification of inherent limitations of audit and misconceptions regarding the role of an auditor.

AA – Dec 2022 – L2 – Q3b – Audit and Assurance Evidence

Explains four limitations of using ratio analysis in auditing and their impact on financial statement assertions.

AA – May 2019 – L2 – Q1b – Audit and Assurance Evidence

Discusses the advantages of auditor independence and the inherent limitations of auditing.

AA – April 2022 – L2 – Q2a – Regulatory Framework and Audit Responsibilities

Identify the rights of an auditor and actions when rights are denied.

AA – Nov 2022 – L2 – Q5 – Internal Audit Necessity

Explanation on internal audit necessity, maintaining independence, and internal audit limitations.

AA – May 2017 – L2 – SC – Q7 – Audit-related services

Examination of analytical comparisons, precautions in substantive testing, and limitations of ratio analysis in auditing.

AA – July 2023 – L2 – Q2c – Audit Failure and Expectation Gap, Regulatory Framework and Audit Responsibilities

Identification of inherent limitations of audit and misconceptions regarding the role of an auditor.

AA – Dec 2022 – L2 – Q3b – Audit and Assurance Evidence

Explains four limitations of using ratio analysis in auditing and their impact on financial statement assertions.

AA – May 2019 – L2 – Q1b – Audit and Assurance Evidence

Discusses the advantages of auditor independence and the inherent limitations of auditing.

AA – April 2022 – L2 – Q2a – Regulatory Framework and Audit Responsibilities

Identify the rights of an auditor and actions when rights are denied.

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Question Tag: Audit Limitations

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AA – Nov 2022 – L2 – Q5 – Internal Audit Necessity

Explanation on internal audit necessity, maintaining independence, and internal audit limitations.

You're reporting an error for "AA – Nov 2022 – L2 – Q5 – Internal Audit Necessity"

AA – May 2017 – L2 – SC – Q7 – Audit-related services

Examination of analytical comparisons, precautions in substantive testing, and limitations of ratio analysis in auditing.

You're reporting an error for "AA – May 2017 – L2 – SC – Q7 – Audit-related services"

AA – July 2023 – L2 – Q2c – Audit Failure and Expectation Gap, Regulatory Framework and Audit Responsibilities

Identification of inherent limitations of audit and misconceptions regarding the role of an auditor.

You're reporting an error for "AA – July 2023 – L2 – Q2c – Audit Failure and Expectation Gap, Regulatory Framework and Audit Responsibilities"

AA – Dec 2022 – L2 – Q3b – Audit and Assurance Evidence

Explains four limitations of using ratio analysis in auditing and their impact on financial statement assertions.

You're reporting an error for "AA – Dec 2022 – L2 – Q3b – Audit and Assurance Evidence"

AA – May 2019 – L2 – Q1b – Audit and Assurance Evidence

Discusses the advantages of auditor independence and the inherent limitations of auditing.

You're reporting an error for "AA – May 2019 – L2 – Q1b – Audit and Assurance Evidence"

AA – April 2022 – L2 – Q2a – Regulatory Framework and Audit Responsibilities

Identify the rights of an auditor and actions when rights are denied.

You're reporting an error for "AA – April 2022 – L2 – Q2a – Regulatory Framework and Audit Responsibilities"

AA – Nov 2022 – L2 – Q5 – Internal Audit Necessity

Explanation on internal audit necessity, maintaining independence, and internal audit limitations.

You're reporting an error for "AA – Nov 2022 – L2 – Q5 – Internal Audit Necessity"

AA – May 2017 – L2 – SC – Q7 – Audit-related services

Examination of analytical comparisons, precautions in substantive testing, and limitations of ratio analysis in auditing.

You're reporting an error for "AA – May 2017 – L2 – SC – Q7 – Audit-related services"

AA – July 2023 – L2 – Q2c – Audit Failure and Expectation Gap, Regulatory Framework and Audit Responsibilities

Identification of inherent limitations of audit and misconceptions regarding the role of an auditor.

You're reporting an error for "AA – July 2023 – L2 – Q2c – Audit Failure and Expectation Gap, Regulatory Framework and Audit Responsibilities"

AA – Dec 2022 – L2 – Q3b – Audit and Assurance Evidence

Explains four limitations of using ratio analysis in auditing and their impact on financial statement assertions.

You're reporting an error for "AA – Dec 2022 – L2 – Q3b – Audit and Assurance Evidence"

AA – May 2019 – L2 – Q1b – Audit and Assurance Evidence

Discusses the advantages of auditor independence and the inherent limitations of auditing.

You're reporting an error for "AA – May 2019 – L2 – Q1b – Audit and Assurance Evidence"

AA – April 2022 – L2 – Q2a – Regulatory Framework and Audit Responsibilities

Identify the rights of an auditor and actions when rights are denied.

You're reporting an error for "AA – April 2022 – L2 – Q2a – Regulatory Framework and Audit Responsibilities"

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