Question Tag: Quality control

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  • 20 Marks

AAA – Nov 2014 – L3 – SB – Q2 – Quality Control in Audit Firms

Communication brief for quality control and audit working papers with a Q&A session.

You have just joined the partnership of a small firm of Chartered Accountants, SMP Accountants & Partners, and have been asked to prepare a communication brief for distribution to all staff, which will then be followed by a presentation with a question-and-answer session. The communication brief required is regarding quality control procedures and audit working papers.

ISA 220 requires quality control procedures to be implemented at the engagement level, and ISQC 1 requires them to be implemented at the level of the audit firm. The partners are concerned that the firm’s quality control procedures may not be satisfactory as they have never been reviewed since they were first implemented five years ago. In addition, staff are able to read the policies and procedures in the staff manual, but there are currently no other ways in which the information is communicated to them.

Required:

a. Prepare a communication brief for distribution to all staff, which sets out: i. why quality control policies and procedures are necessary
ii. the areas that should be covered by quality control policies
iii. procedures that would be required to ensure that the policies are met.
(12 Marks)

b. Answer the following queries which were asked at the question-and-answer session:
i. What is the difference between a hot review and a cold review, and why are both necessary?
ii. Why is it so important that all audit reasons and justifications are documented in the working papers when it should be obvious from test results what the key issues are?
iii. Why do audit working papers have to be standardized since this inhibits auditors exercising their skills and experience in the most effective way?
(8 Marks)

(Total: 20 Marks)

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  • 1 Marks

AAA – Nov 2013 – L3 – AII – Q9 – Quality Control in Audit Firms

Identifies the type of review conducted by a partner or manager for compliance with standards.

A review by a partner or manager to ensure that the form and content of the financial statements are in accordance with accounting standards, CAMA CAPC20 LFN 2004 and Securities and Exchange Commission (SEC), where applicable is ………………….. Review.

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  • 1 Marks

AAA – Nov 2013 – L3 – AII – Q5 – Quality Control in Audit Firms

Discusses the scope of quality control within an audit firm.

Quality control should not be in respect of each engagement only but must be a……………………….in the entire firm.

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  • 1 Marks

AAA – Nov 2012 – L3 – AII – Q17 – Quality Control in Audit Firms

Identifies the requirement for documenting and communicating quality control policies in audit firms.

Audit firms are required to ensure that their quality control policies and procedures are documented and ……………… to the firm’s personnel.

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  • 1 Marks

AAA – Nov 2012 – L3 – SA – Q19 – Quality Control in Audit Firms

Identifying the primary objective of conducting an audit review.

Which of the following is the most appropriate objective of audit review?

A. Frauds and errors do not occur in an audit engagement
B. The audit is completed early for the report to be used
C. The audit is performed with the highest standard of quality
D. To ensure that appropriate bill is sent to the client
E. No dispute arises between the firm and the client

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  • 1 Marks

AAA – Nov 2011 – L3 – SA – Q15 – Quality Control in Audit Firms

Identifies an action that does not contribute to quality control in audits by professional bodies.

Quality control in audit is maintained by professional accountancy bodies through all the following EXCEPT:

  • A. Publishing of auditing standards
  • B. Publishing of accounting standards
  • C. Encouraging members to be computer literate
  • D. Publishing code of conduct for members
  • E. Establishment of public practice sector

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  • 15 Marks

AAA – May 2024 – L3 – SC – Q6 – Quality Control in Audit Firms

Outline the impacts of poor quality audit services and engagement partner responsibilities under ISA 220.

The partners of a number of small firms, some of whom act as alternate firms to each other, were considering the outcome of some reviews by the Financial Reporting Council on some of the financial statements the firms prepared. These reviews showed significant lapses in the works they carried out and compliance failure of some appropriate standards. Some other practitioners among them also raised concerns about their failure to meet most of the monitoring guidelines issued by the Professional Practice Monitoring Committee of the Institute. Based on these, it has become imperative that something has to be done urgently to save them from further sanctions and possible litigations.

The partners of these small firms have consulted, sought, and obtained approval of your firm to train them on the requirements of relevant regulatory bodies as part of your firm’s contribution to the accountancy profession in general and in recognition of your firm as one of the reputable big firms. Your partner has directed that you prepare and make a presentation to help improve their service delivery standards.

Required:

Prepare an outline for a paper that will be used to address these practitioners on the following:

a. The consequences and actions that could arise as a result of poor quality professional service delivery.

(3 Marks)

b. The responsibilities of “key quality control matters” placed on the engagement partner in accordance with ISA 220-Quality Control for an Audit of Financial Statements. (12 Marks)

(Total 15 Marks)

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  • 20 Marks

AA – May 2021 – L2 – Q5 – Audit Evidence

Explanation of sufficient and appropriate audit evidence, factors in deciding audit evidence amount, auditor actions on inadequate evidence, and audit documentation rationale.

JAK Professional Services is a member firm of James Candle International in Cayman Islands. The member firm’s practice review exercise has just been concluded. As part of the global firm, practice reviews are done yearly on selected engagement files where member firms review one another. Some of the issues included in the review notes raised on JAK Professional Services audit files are as follows:

i. Lack of sufficient and appropriate audit evidence regarding audit of cash and bank as well as inventory balances. This was partly due to the fact that no evidence existed in the file regarding physical cash and inventory count which were material;

ii. No proper documentation of confirmation replies received from banks, receivables, and solicitors;

iii. No cash flow working documentation to show how the figures on the cash flow statements in the financial statements were arrived at;

iv. Improper documentation of how expected credit loss on financial instruments in the financial statements were arrived at; and

v. Figures in the financial statements could not be traced to the respective working papers.

As an experienced auditor, some of the trainees were not impressed about the report and have approached you for clarification.

You are required to explain:

a. Meaning of ‘sufficient and appropriate audit evidence’ (5 Marks)
b. Factors to be considered when deciding amount of audit evidence needed (4 Marks)
c. What auditors should do in case of inadequate audit evidence (5 Marks)
d. Reasons for sufficient and appropriate audit documentation (6 Marks)

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  • 20 Marks

AA – May 2022 – L2 – SB – Q3 – Planning an Audit

Discuss the benefits of audit planning, importance of maintaining audit quality, and procedures auditors should establish to ensure audit quality.

The objective of the auditor, according to ISA 300 – Planning an audit of financial statements, is to plan and perform an audit in an effective manner.

a. Explain the benefits of audit planning. (5 Marks)
b. Why is it important that audit firms should maintain the quality of their work? (5 Marks)
c. Explain the procedures a firm of auditors should establish internally to maintain the quality of its work. (10 Marks)

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  • 1 Marks

BMF – May 2021 – L1 – SA – Q7 – Basic Management Functions

Identifies which activity does not belong to the manufacturing function in an organization.

Which of the following activities may NOT be taken as part of manufacturing function in an organization?
A. Engineering and maintenance work
B. Physical delivery of goods to customers
C. Production planning and control
D. Quality control and checking
E. Inspection of finished goods

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  • 4 Marks

MI – May 2024 – L1 – SB – Q4c – Information Systems

Define quality assurance and quality control in relation to information systems.

c. Define the following terms in relation to information systems:
i. Quality assurance
ii. Quality control (4 Marks)

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  • 5 Marks

AA – Dec 2022 – L2 – Q1c – Professional and Ethical Considerations

Explains the need for a quality control system in accounting firms, with reference to the audit of God First Microfinance.

You are the manager in charge of the audit of God First Microfinance Co. Ltd for the year ended 31 December, 2021. Due to the highly regulated environment in which such companies have to operate, your partner has requested that, right from the planning stage of the audit, you strictly apply the requirement of ISA 220: Quality Control for an audit of financial statements.

Required:
State FIVE (5) reasons for the need for a quality control system in accounting firms.

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  • 10 Marks

AA – May 2020 – L2 – Q5a – Planning and Approach for Audit and Assurance Engagements

Discuss three factors the auditor must consider before accepting or continuing an audit engagement.

ISA 220 – Quality Control for an Audit of Financial Statements deals with the specific responsibilities of the auditor regarding quality control procedures for an audit of financial statements. It also addresses, where applicable, the responsibilities of the engagement quality control reviewer. According to ISA 220, the auditor should consider certain factors before accepting a new engagement or continuing an existing engagement.

Required:
Discuss THREE (3) of such factors. (10 marks)

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  • 5 Marks

MA – Mar 2024 – L2 – Q3b – Performance analysis

This question explains the principles of Total Quality Management (TQM) that improve operational processes in an organization.

Total Quality Management (TQM) is a management framework based on the belief that an organisation can build long-term success by having all its members—from low-level workers to its highest-ranking executives—focus on improving quality and delivering customer satisfaction.

Required:
Explain THREE (3) principles of TQM that improve operational processes in organizations.

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  • 20 Marks

AAA – July 2023 – L3 – Q3 – The audit approach | Audit evidence | Reporting

Evaluate quality control issues and their implications for audit completion, including actions to be taken.

The audit of Nkwa Ltd’s financial statements for the year ended 30 November 2022 is nearing completion, and the auditor’s report is due to be signed next week. Nkwa Ltd manufactures parts and components for the aviation industry. You are conducting an engagement quality control review on the audit of Nkwa Ltd, which is a listed entity and a significant new client of your firm. The draft financial statements recognize revenue of GH¢8.7 million, assets of GH¢15.2 million, and profit before tax of GH¢1.8 million.

You have identified the following issues as a result of your review:

a) The planned audit approach to trade payables was to place reliance on purchasing controls and keep substantive tests to a minimum. During control testing on trade payables, from a random statistical sample, the audit team identified three purchase orders that had not been authorized by the procurement manager. On review of the supporting documentation, the audit team concluded that the items were legitimate business purchases and therefore decided that no additional procedures were required. (4 marks)

b) Following a review of petty cash transactions, the audit assistant identified that the petty cashier paid for taxi fares for personal, non-business journeys with a total value of GH¢175. Following discussions with the Audit Assistant, you have ascertained that he did not report the matter as the amount is immaterial. The audit assistant also commented that the petty cashier is his brother, and that he did not want to get him into trouble. (6 marks)

c) Cut-off testing on revenue has identified two goods despatch notes, dated 2 December 2022, for items sent to Chinn Co, with a combined sales value of GH¢17,880, which had been included in revenue for the year ended 30 November 2022. The client’s financial controller, David Mount, has explained that Chinn Co does not order on a regular basis from Nkwa Ltd. In the absence of a regular payment history with Chinn Co, and in order to minimize the receivables collection period from this particular customer, the sales invoice was raised and sent to the customer on the same day that the sales order was received. The average time period between the receipt of an order and despatching the goods to the customer is approximately one to two weeks. The audit working papers have concluded that no further investigation is necessary. (6 marks)

d) The Finance Director, Leslie Gray, has not completed the tax computation for the year ended 30 November 2022. He has recently asked the audit assistant to compute the company’s tax payable for the year on the basis that as a newly qualified chartered accountant, the audit assistant was more up to date with recent changes in tax legislation. (4 marks)

Required:
Evaluate the quality control issues and the implications for the completion of the audit, including any further actions that should be taken by your audit firm. Your answer should include the matters to be communicated to management and those charged with governance in relation to the audit of Nkwa Ltd.

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  • 10 Marks

AAA – Nov 2020 – L3 – Q5b – The Audit Approach

Identify and comment on the implications of findings related to quality control policies and procedures during an audit engagement.

You are a Partner in Green & Co., a firm of Chartered Accountants, with specific responsibility for the quality of audits. Green & Co. was appointed auditor of Cleanup Co, a provider of waste management services, in July 2019. You have just visited the audit team at the head office of Cleanup Co. The audit team comprises an audit manager, an audit senior, and two audit trainees.

During your visit, a review of the audit working papers revealed the following:

i) On the audit planning checklist, the audit senior has crossed through the analytical procedures section and written ‘not applicable – new client’. The audit planning checklist has not been signed off as having been reviewed.

ii) The audit manager last visited Cleanup Co.’s office when the final audit commenced two weeks ago on 1 August. The audit senior has since completed the audit of tangible non-current assets (including property and service equipment) which amount to GH¢ 600,000 as at 30 June 2019 (2018 – GH¢ 600,000). The audit manager spends most of his time working from Green & Co’s office and is currently allocated to three other assignments as well as Cleanup Co.’s audit.

iii) At 30 June 2019, trade receivables amounted to GH¢ 2.1 million (2018 – GH¢ 900,000). One of the trainees has just finished sending out requests for direct confirmation of customers’ balances as at the end of the reporting period.

iv) The other trainee has been assigned the audit of the consumable supplies, which includes inventory amounting to GH¢ 88,000 (2018 – GH¢ 53,000). The trainee has carried out tests of controls over the perpetual inventory records and confirmed the ‘roll-back’ of a sample of current quantities to book quantities as at the year end.

v) The audit manager has noted the following matter for your attention. The financial statements as at 30 June 2018 disclosed, as unquantifiable, a contingent liability for pending litigation. However, the audit manager has seen a letter confirming that the matter was settled out of court for GH¢ 450,000 on 14 September 2018. The auditor’s report on the financial statements for the year ended 30 June 2018 was unmodified and signed on 19 September 2018. The audit manager believes that management of Cleanup Co. is not aware of the error and has not brought it to their attention.

Required:
Identify and comment on the implications of these findings for Green & Co’s quality control policies and procedures. (10 marks)

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  • 2 Marks

AAA – Nov 2020 – L3 – Q2c – The Audit Approach

Discuss two problems in implementing quality control procedures in a small firm of Chartered Accountants and recommend solutions.

Discuss TWO (2) problems that you may face in implementing quality control procedures in a small firm of Chartered Accountants and recommend how these problems may be overcome. (2 marks)

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  • 10 Marks

BMIS – Nov 2017 – L1 – Q7b – Operations strategy

b) Quality is the totality of features and characteristics of a product or service which bears on its ability to meet stated or implied needs. Required: i) Distinguish between Quality Management, Quality Assurance, and Quality Control. (6 marks) ii) Outline any TWO of the five general activities involved in quality management systems. (4 marks)

b) Quality is the totality of features and characteristics of a product or service which bears on its ability to meet stated or implied needs.

Required:
i) Distinguish between Quality Management, Quality Assurance, and Quality Control.
(6 marks)

ii) Outline any TWO of the five general activities involved in quality management systems.
(4 marks)

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  • 10 Marks

BMIS – Nov 2017 – L1 – Q7a – Competitive advantage and strategic direction

Explain Critical Success Factors (CSFs) and stages in managing strategy using CSFs.

a) A strategy is a course of action, including the specification of resources required to achieve a specific objective. Strategy is concerned with the higher direction of an enterprise that involves top management.

As an alternative to a systematic goal-structured approach, an organization may focus on Critical Success Factors (CSFs) to manage strategy. Johnson and Scholes describe SIX stages in the process of managing strategy using CSFs.

Required:
i) What are Critical Success Factors (CSFs)?
(2 marks)

ii) Explain any FOUR of the stages of managing strategy using CSFs.
(8 marks)

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  • 10 Marks

BMIS – Dec 2023 – L1 – Q4b – Operations strategy

Explains the functions to be performed by the Head of Quality Control in a manufacturing company.

Mr. Brown has been appointed as head of the Quality Control Department of Real Marines Manufacturing Ltd, a company that processes tuna.

Required:

Explain FIVE (5) functions to be performed by Mr. Brown on his appointment.

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