19 Jul EXPLAIN THE WAYS IN WHICH AN AUDITOR CAN MINIMIZE HIS POTENTIAL LIABILITY FOR PROFESSIONAL NEGLIGENCE.
QUESTION ONE
a) In order to conduct an audit effectively and efficiently, an auditor should properly plan for the assignment.
i) Explain the matters that an auditor should take into account at the planning stage of an audit exercise. (8 marks)
ii) Outline the ways in which an auditor acquires knowledge about the client’s business and industry. (4 marks)
b) The final stage of an audit includes an overall review of the financial statements. Explain the procedures that the auditor should adopt for the final review. (4 marks)
c) Highlight the qualities required of the final accounts prepared by a client company.
(4 marks)
(Total: 20 marks)
QUESTION TWO
a) The auditor must exercise due care and skill before he certifies that the financial statements show a true and fair view.
Explain the ways in which an auditor can minimize his potential liability for professional negligence. (10 marks)
b) Highlight the possible defenses available to an auditor in a court of law who has been sued for failure to detect fraud in client’s company. (5 marks)
c) In the context of the Companies Act, state the duties of an auditor. (5 marks)
(Total: 20 marks)
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