Auditing Question Massey PDF

School of Accountancy
110.279 Auditing
Administration Guide
Extramural & Internal
Palmerston North
Auckland
Wellington
Semester 2, 2009
<www-accountancy.massey.ac.nz>
Copyright
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Contents
Page
Introduction
Welcome.................................................................................................................................1
Paper Coordinator and Campus Co-ordinators ......................................................................2
Essentials
Aims .......................................................................................................................................3
Topics Covered.......................................................................................................................3
Textbooks and Recommended Reading .................................................................................4
Assessment .............................................................................................................................5
Studying Auditing ..................................................................................................................5
Details
Massey University Credit System from 2007 .........................................................................7
Suggested Study Programme ..................................................................................................8
Lectures, Tutorials, Workshops and Clinics ...........................................................................9
Assignment and Test Details ................................................................................................10
- Overview ...........................................................................................................................10
- Presentation of Written Work ...........................................................................................10
- Assignment Submission and Honesty Declaration ...........................................................11
Due Dates, Extensions and Penalties ....................................................................................14
Academic Ethics, Dishonesty and Plagiarism .....................................................................15
Assignment 1 ........................................................................................................................16
Assignment 2 ........................................................................................................................19
Posting, Courses & Contacts

Posting of Materials..............................................................................................................20
Contact ................................................................................................................................20
Extramural Contact Course ..................................................................................................21
General Contacts ..................................................................................................................22
Complaints ...........................................................................................................................22
Internet Resources
WebCT ................................................................................................................................23
Discussion Forums ...............................................................................................................23
Internet Links .......................................................................................................................23
Accessing the Online Resources...........................................................................................24
Library and Referencing

Library Service .....................................................................................................................26
Citing References .................................................................................................................27
Final Examination
Final Examination Important Details and Regulations ......................................................29
The 2009 Examination Paper and Past Examination Papers ................................................29
Sample Examination Paper...................................................................................................30
Introduction
> Welcome
Welcome to the 110.279 Auditing paper!
Significant changes in Auditing (and Accounting) in New Zealand and globally have been
taking place recently and this is expected to continue during 2009. It is appropriate therefore
that some significant changes have been made to this paper for 2009:
The paper is based on a new text and we are using the latest edition, published in
2009, so that we are able to work with the most up-to-date material available,
The 110.279 Auditing and 110.379 Advanced Auditing papers have been
restructured so that they integrate better and reflect changing professional
requirements that were signalled towards the end of 2008 for those wishing to
qualify as Chartered Accountants in New Zealand,
There will be a significant change in the nature of questions used in tutorials, tests
and the final examination. These questions will place more emphasis on testing the
depth of your understanding of important concepts and less emphasis on your ability
to simply recall information than has been the case in past years.
Knowledge of Auditing concepts is essential for professional accountants; even for those
who do not intend to practice as auditors. An understanding of how to assess risk and
materiality, for example are critical tools for an accountant to be able to work efficiently and
effectively. In addition, managerial ability is significantly enhanced by an understanding of
assurance services (Audit is only one of these services) and how and when it is appropriate
to use them. It is no surprise therefore, that 110.279 Auditing is a Major Requirement for the
BBS (Accountancy) Degree and a compulsory paper for the BAcc Degree.
The 110.279 Auditing Paper is concerned mainly with developing your understanding of a
puzzle known as The Audit Process. Students should therefore regard the topics in the
paper as pieces of a puzzle which are related to each other, rather than as discrete units to be
studied in isolation. You also need to understand the relationships between given topics/
elements of auditing, for example, you may be asked to explain how audit risk and audit
materiality affect audit planning. This clearly demands a deeper understanding than simply
an ability to recall the notion of risk or materiality.
This means that you will need to work consistently right from the start of the semester, so
that you dont have gaps in earlier fundamental knowledge that you will need to draw on, to
understand later steps in the Audit Process.
We hope you will enjoy this paper it has the potential to develop your thinking skills in
ways that will promote your chances of success in life let alone an accounting career!
110.279 Administration Guide 1

> Paper Co-ordinator and Campus Co-ordinators
Paper Co-ordinator and Albany Campus Co-ordinator:
Warwick Stent
Telephone (09) 414 0800 Extn 9542
Office Room QA3.18
Office Hours Thursday 10.00 11.00am and 2.00 - 3.00pm
Fax (09) 441 8133
Email w.j.stent@massey.ac.nz
Postal Address School of Accountancy

Private Bag 102 904
North Shore Mail Centre
Auckland
Palmerston North (Internal) Campus & Extramural Co-ordinator:
Lindsay Hawkes
Telephone (06) 356 9099 Extn 2157
Office Room 1.31, Social Science Tower
Office Hours Wednesday 10.00 -12.00am
Fax (06) 350 5617
Email L.C.Hawkes@massey.ac.nz
Postal address School of Accountancy

Private Bag 11 222
Palmerston North.
Wellington Campus Coordinator:
John Arcus
Telephone (04) 801 5799 Extn 6887
Office 5C22
Office Hours Wednesday 9.00am-10.00am & Thursday 10.00am-11.00am
Fax (04) 801 2885
Email j.d.arcus@massey.ac.nz
Postal address School of Accountancy

Private Bag 756
Wellington
Students who require assistance with the course material should contact their campus
coordinator in the first instance. The 110.279 teaching staff will respond to student enquiries
outside of the above office hours - where these are reasonable. We do not, however,
welcome student enquiries outside of normal business hours, i.e., at nights or weekends.

Essentials
> Aims
The Prescription for this paper is: An introduction to the basic principles of auditing,
including the function of audits and the concepts that govern audit processes and practices.
The Learning Outcomes which Paper 110.279 seeks to promote are that you, the student,
should be able to:
1. Explain the nature, scope, and objectives of audit and assurance services.
2. Evaluate selected theories that purport to explain the New Zealand financial
attest audit.
3. Discuss the effect that contemporary issues have on the financial attest audit.
4. Demonstrate an understanding of the New Zealand financial attest auditors
professional and legal responsibilities.
5. Evaluate the role of ethics, independence, risk, internal controls, materiality,
and evidence in a financial attest audit.
6. Demonstrate an understanding of the principal tests, techniques, and types of
report used by a financial attest auditor.
The Overall Result for you, we hope, is that you will obtain knowledge of auditing and
auditing concepts, which we believe is essential for any financial manager or professional
accountant, even if you do not intend to practice as an auditor. The concepts should enable
you to work more efficiently and effectively (e.g. how to assess what is risky and material);
the understanding of auditing and other assurance services should promote your ability to
assess when you need assurance and what type of assurance to seek.
> Topics Covered

See Suggested Study Program.

> Textbooks and Recommended Reading
Required Text
Modern Auditing & Assurance Services by Leung, Coram, Cooper and Richardson (4th
Edition), published by John Wiley & Sons Australia Limited, 2009. Copies of the textbook
are held by the library.
Recommended Text
Auditing: Theory and Practice in New Zealand by Karen Van Peursem and Michael J Pratt
(5th Edition), published by Prentice Hall (Pearsons), 2006. Copies of this text are also held by
the library.
Study Guide
It is essential to use the study guide for this paper, as it provides additional material to
supplement the main text. All Readings, Tutorial Questions, and Additional
Material provided or referred to in the Study Guide are examinable. In other words, you
will be presented with examination questions that depend on having studied these elements
of the Study Guide.
WebCT
Suggested solutions to the Tutorial Questions will be made available to you on WebCT, as
well as other material such as occasional updates and current issues.
See Internet Resources/ WebCT further on in this Guide for further information
relating to use of WebCT and our expectations of you in this regard.
Ordering of Text Books

You may obtain or order your text books from any Bennetts University Bookshop. For
extramural students, please use the contact details below:
Bennetts University Book Centre

Freepost 118333
Massey University
Palmerston North Telephone: (06) 354 6020

> Assessment
Extramural Students
Two assignments have been set for extramural students and must be submitted to NSATS
for marking by the paper coordinator.
Internal Students
One assignment and one test has been set for internal students. The assignment is
compulsory for internal students and must be submitted for marking by the paper
coordinators.
All internal students must sit the test on the date set. An internally registered student who
submits the assignment set for extramural students in lieu of sitting the test may get zero for
that piece of assessment.
Assignment Due Date Weighting

Assignment One (All students) 15%
21st August 2009
Test (Internal students only) Saturday

th
19 September 2009 15%
th
Assignment Two (Extramural students only) 30 September 2009
th
Final examination (All students) 30 October 2009 70%
100%
Course work is worth 30% of the total marks for paper 110.279. The balance of the
assessment comprises a final examination worth 70% of the total marks for the paper.
NOTE: As the course work comprises only 30% of this papers total marks, the
Universitys regulations prohibit the awarding of an AEG pass where this would
normally otherwise be merited.
> Studying Auditing

Auditing deals with judgment, ethics, and other abstract concepts. Consequently, auditing is
not an easy subject to grasp when first encountered - it is far less numbers and rules
based than many of the other subjects/ papers you will study. It cannot be learned by merely
memorising a series of rules. It is a second-year paper and we strongly recommend that you
wait until your second year to do it, as it requires a degree of academic maturity to deal with
topics that often have no simple definition and and/or complex relationships, which must be
properly appreciated to fully understand the Audit Process.
Understanding is the key to success in 110.279. To achieve understanding requires

consistent hard work throughout the semester. It is a big mistake to allow yourself to get left
behind and think you will catch up at the end of the semester a mistake which is likely to
end in failing the paper! You must read the material, think about it, read it again, test
yourself by attempting the tutorial questions properly, puzzle over what you do not
understand, return to the text or other material for clarification, and if necessary, ask your
tutor or lecturer for help. It is also important that students have sufficient grasp of English to
cope with these demands.
Students who have a disadvantage in English must ensure that they have the appropriate
understanding of the terms used in this paper and, where necessary, must confirm their
understanding with the lecturer/tutor concerned.
You may wish to try what I have found to be a particularly effective learning strategy the
SQ3R Method:
Survey: The topic for each week in the Study Guide always starts with Learning
Objectives. This overview of what we hope students will learn is effectively the equivalent
of surveying what is to come. You should supplement this by skim reading the relevant
chapter or reading concerned, concentrating on the Introduction and Summary, as these are
normally provided in order to give you a broad overview.
Question:
You then need to move from a passive to an active state of mind. Having surveyed the
material, you should frame questions in your mind, that you want to answer by reading the
material in more depth. Also grab a pencil or highlighter and be ready to make brief notes or
highlight key points during the next phase.
Read: This is the detailed Study phase, that is required to properly understand the material.
Review: Reflect back on each learning objective, test your learning with some questions and
recap/summarise briefly what has been covered. This phase is like doing the Survey again,
only this time after your detailed read if you look at headings within the text and cannot
remember much of what you have just read, you may need to read it again carefully.
Revise: Apparently studies have shown that even after all of the above steps have been
taken, you still need exposure to the material concerned again, within 48 hours. A good way
of doing this and killing two birds with one stone is to complete the tutorial questions and
to do tutorial preparation within 48 hours (current timetabling constraints mean that tutorials
themselves only take place within 120 hours for the 110.279 course).
As noted earlier, Auditing is a systematic process, not a collection of independent rules and
ideas. You must appreciate how individual concepts relate to each other they are all part of
the risk reduction process that is Auditing.

Details
> Massey University Credit System from 2007
The University has converted from a 100 point standard equivalent full-time year for
academic programmes to one of 120 credits. As from February 2007, it will use the
expression credits to replace points.
For existing Massey students, the change will have minimal impact. They will be required to
pass the same number of papers to complete their programmes.
The conversion from points to credit is straightforward. Credits for papers completed before
2007 are multiplied by 1.2. For example, 12.5 point papers become 15 credit papers and 25
point papers become 30 credit papers. Transitional arrangements have been put in place to
see to papers with odd numbers of points to ensure that no students will be disadvantaged.
In the past, the point system gave an indication of the total amount of time that a student
might reasonably expect to spend on each paper in order to satisfactorily complete the
assessment requirements (including lectures, laboratories, tutorials, visits and study time for
an internal student, or campus and/or regional courses, study groups and private study time
for an extramural student). Converted into a number of hours per week, this was referred to
as the effective weekly hours for the paper.
With the introduction of the credit system, the total hours required for a student to study a
paper remains the same. On average, a student is expected to spend approximately 12.5
hours per week for a 15 credit paper. The course outline for each paper should indicate the
effective weekly hours and how these might typically be spent.

> Suggested Study Programme
Semester 2, 2009
Text Reference (Leung 4th Edition)

Week Starts Topic
Examinable Material
1 13/7/09 Auditing, Assurance and the Ch. 1.
Profession. NZICA Explanatory Foreword to Engagement
Standards
NZICA - Framework for Assurance Services
2&3 20/07/09 Overview of the Audit of Financial Ch. 4. secs 4.1 and 4.5 to 4.7
Statements and The Audit Report. Study Guide Reading: Knechel et al (2007)
Study Guide Reading: See Additional Information)
4 3/08/09 Legal Environment Study Guide Readings from Van Peursem (2006):
Ch. 5 and
Ch. 7 extracts as provided,
Study Guide Readings from Statute:
Cos Act extracts provided,
Financial Reporting Act extracts provided
5 10/08/09 Professional Ethics and Conduct. Study Guide Readings:

van Peursem (2006) - Ch. 6,
Cox G. (2003)
Gray J. (2005)
6 17/08/09 Client Evaluation and Planning Ch. 6
Mid-Semester Break w/c 24/08/09 & 31/08/09

7 7/09/09 Business and Audit Risk Assessment Ch. 7
8 14/09/09 Materiality & Evidence Ch. 8
9 21/09/09 Tests of Controls Ch. 9
10 28/09/09 Designing Substantive Procedures Ch. 10

Recap of Audit Report (from Wk 2&3 Additional
Information) as scene setter for other types of
assurance covered in wks 11 & 12
11 5/10/09 Governance, Internal Audit & Public Ch. 18
Sector Audits Study Guide Readings:
van Peursem (2006) - Ch. 5, pgs 84-86
Appendix 16 to the NZX Listing Rules: Corporate
Governance Best Practice Code
About Us - Controller and Auditor General (NZ)
12 12/10/09 Other Assurance Engagements Ch. 17.(excl 17.5)

Recap of Week 1 Readings from NZICA:
Explanatory Foreword to Engagement Standards
Framework for Assurance Services
Lectures may vary slightly from the topics listed for a particular week.

> Lectures, Tutorials, Workshops & Clinics
Lectures
Internal 110.279 students are required to attend two hours of lectures per week. Students at
each campus should consult the relevant campus coordinator about lecture times, venues,
and format as lectures and tutorials/workshops will not be uniform across all campuses.
Note: Lectures are intended to introduce the main issues. They may not cover every
examinable aspect of the course.
The main learning resources for 110.279 are the prescribed text and the study guides/notes.
You should Survey this material before attending lectures.
Tutorials/Workshops
Internal 110.279 students should attend one hour of tutorials/workshops per week.
Tutorials/workshops are scheduled for weeks 2 to 12, inclusive, unless otherwise advised.
Not all times and venues booked for 110.279 tutorials/workshops, per the University
timetable will be used. Lecturers will advise you via WebCT, noticeboards and at lectures,
of arrangements, venues and times for your tutorials, before or during the first week of the
program. Accordingly, before arranging your timetable, you should confirm the
arrangements that apply to you.
Importance of Tutorials/Workshops
Tutorials/workshops are an essential element of the course program and are designed to
assist you in the understanding and application of concepts covered in lectures. A record of
attendance may be kept for these one hour sessions. If you choose not to attend tutorials (or
lectures) do not expect that the 110.279 teaching staff will provide you with any special
assistance to compensate for that non-attendance.
Tutorial questions give you a chance to test your understanding of material covered in the
previous lecture. If you regard them as practice/ coaching sessions for the exam and spend
time completing the questions set for each week and noting issues/ difficulties to raise with
your tutor, it is likely to improve your final grade significantly.
Additional Workshops & Clinics on the Timetable
These will be used on an as needed basis. Class representatives are encouraged to liaise
with their class and inform lecturers where a need is perceived for a workshop or clinic to be
run. The lecturer will then advise the class when such sessions will be held
Note: This means that tutorials, workshops and clinics per the University timetable will NOT
all be used as scheduled for all students. Your lecturer will advise you which one hour
tutorial you are scheduled for and which workshop and clinic sessions will be held.

> Assignment & Test Details
Overview
1. There are two course work elements/ assessments for all students, which
contribute to the Year Mark for this paper:
First Assessment (15%):
o All students must submit Assignment 1,
Second Assessment (15%):
o Only Internal students must write a test,
o Only extramural students must submit Assignment 2.
2. Due dates appear below:
Assignment 1 (compulsory for all students)

Due Date: 21st of August, 2009
Coverage: Weeks 1 - 3
Test (only required/ compulsory for internal students)

Due Date: Saturday, 19th of September, 2009
Assignment 2 (only required/ compulsory for extramural

students)
Due Date: 30th of September, 2009
3. The questions for Assignments 1 and 2 may be found at the end of the Details
section of this Guide.
Note: Reference to appropriate library resources is likely to enhance the quality of your
assignment and the learning you gain as a result of completing it.
Presentation of Written Work
The nature of your response to assignment (and examination) questions must be such that
the response is: legible; logically presented; appropriate (relevant); and complete. In essence,
an answer must address the full question set and must have the potential to persuade the
examiner that you do, indeed, comprehend and can articulate on the issues in question.
Except in the case of assignments where an answer template is provided, submitted work
should generally comply with the following requirements.
All written work must be submitted on A4 (21cm x 29.7cm) sized paper.

Please write on one side of the paper only.
Leave a 4cm margin on the left-hand side for markers comments.
Use double or 1 line spacing.

Pages should be numbered in one continuous sequence. Commence numbering from the
page following the title page.
Print your last name, the paper number, and assignment number at the top of each page.
Number each question (or sub-question) appropriately.
All sheets should be stapled together at the top left-hand corner. Do not clip, pin, use
sticky-tape, or fold pages to secure them.
Do not embellish the paper with a cover. See Assignment Submission below
regarding cover page requirements.
Word limits associated with an assignment question are intended as a guide only. We
will not count the number of words in any answer, nor will anyone who exceeds the
recommended word limit be penalised in any way.
Assignment Submission & Honesty Declaration
Retain a copy of any assignment submitted for assessment.

Staple the School of Accountancy cover page as the top/cover page of your work (see
copy over page) and ensure that you complete all details and sign the Honesty
Declaration
If you are an extramural student add an NSATS cover page to your work (see below for
further details).
.
For Extramural students

NSATS Cover Sheets
Palmerston North based students and all Extramural students

must submit all assignments via NSATS. Individual assignments
must be submitted under separate cover sheets, that is, every
individual assignment must be accompanied by its own cover
sheet. Do not submit multiple assignments under one cover sheet
as there is a strong possibility that an assignment will be
misdirected or lost.
You may hand-deliver assignments to the NSATS Assignments

Office located in the NSATS building on Albany Drive, Turitea
Campus. Simply drop your assignment in the post slot adjacent
to the main entrance of this NSATS building. You may also post
assignments to:
NSATS Assignments Office

Massey University
Private Bag 11 555
Palmerston North
New Zealand

M AS S E Y U N IVE R S IT Y
School of Accountancy
Lecturers Name Paper Number Paper Name
Honesty Declaration -
I declare that this is an original assignment and is entirely my own work.
Where I have made use of the ideas of other writers, I have acknowledged (referenced) the source in every
instance.
Where I have used any diagrams or visuals produced by others, I have acknowledged (referenced) the
source in every instance.
This assignment has been prepared exclusively by me for this paper and has not been and will
not be submitted as assessed work in any other academic paper.
I am aware of the Code of Student Conduct on the Massey University web site
http://calendar.massey.ac.nz/statutes/dr.htm, clause 2 (f), wherein it states [Students shall] act with honesty
and integrity in submitting material or imparting information to the university. Assessment & Examination
Regulations clause (6) clarifies further that dishonesty is a breach of the Code of Student Conduct and will
be dealt with accordingly.
Family Name Given Name(s) ID number Student Signature Date

Palmerston North Internal Students
Palmerston North internal students must place completed assignments in the appropriate
assignments box that is located outside the School of Accountancy reception in SST1.19 by
4pm on the due date.
Auckland students
Auckland students must place completed assignments in the appropriate assignment box that
is located adjacent to the School Secretarys office by 4.00pm on the due date
Wellington students
Wellington students should check the procedure for the submission of assignments with the
Campus coordinator.
Faxing Assignments
Extramural students may fax assignments to 06 350 5625. Use a regular extramural
assignment cover sheet to allow NSATS properly process the assignment. Include your fax
number so you can be notified of any problems in receiving your assignment.
Faxing assignments carries a higher risk than other delivery methods. The system tends to
get overloaded at certain times, and you may have to queue for some time before being able
to transmit your assignment. In other cases, there may be some doubt as to whether the
whole assignment was, in fact, received. Students must carefully consider these potential
problems, as difficulties in faxing an assignment are not acceptable reasons for the
assignment being late.
Do not fax assignments to other Massey fax numbers. Our experience suggests that use of
these numbers often results in the assignment being lost.
Do not post the original to NSATS after faxing an assignment as this confuses the records
system.
Emailing Assignments
Do not email assignments unless you have made specific arrangements to do so with the
appropriate Campus Coordinator beforehand. NSATS will only accept emailed assignments
submitted by extramural students based overseas. Emailing assignments is risky. Experience
has shown these are likely to get lost, or not be received at all. If you choose to email your
assignment (overseas students only) the email address that you should use is:
assign@massey.ac.nz.
Assignments submitted by email must be attached to the email as a Word document.

Assignments submitted by email must be in rich text (RTF) format. If you chose to email an
assignment to NSATS, the onus is on you to confirm that it has been received, in full, by the
due date.

If faxing or emailing assignments, confirm the address to which these must be sent with
NSATS before you submit the assignment.
Due Dates, Extensions and Penalties
Pay particular attention to the assignment due dates, and plan your work accordingly. Late
assignments may be rejected or attract a penalty of up to 10% per week (or part thereof), i.e.,
students can lose up to 10% per week of any marks available for a late answer. In order not
to run the risk of incurring a penalty, assignments must be received by NSATS on, or before
the due date.
As a general rule, no extension of time for the submission of assignments will be allowed.
If you believe that your assignment may be late, do not contact either the Paper/Offering Co-
ordinators or tutors for an extension of time, as none will be granted. If the assignment is
late, submit it as soon as you can, with an explanation and appropriate supporting evidence.
Each case will be considered on its merits.
Pressure of work is not considered a reasonable excuse. The due dates of all submitted
work are known well in advance. Plan ahead and make allowances for possible delays.
Any assessed work submitted on (or after) the date on which suggested answers for that
piece of work were released will not be accepted under any circumstances.

> Academic Ethics, Dishonesty and Plagiarism
As you will learn, the penalties for failing to behave ethically in the professional world can
be severe. This is so too for the academic world. If, in respect of any assessed work, a
student is found to have acted unethically, there may be serious consequences the
Universitys policies and regulations regarding dishonesty and plagiarism are outlined in the
University Calendar. These include suspension, exclusion and the possibility that work may
be penalised or a nil mark awarded.
If you use the words or ideas of another author without citing the source, that is plagiarism.
Plagiarism is not acceptable in any academic submission, under any circumstances. All
copied material submitted for assessment must be clearly referenced as having been copied.
That means that all in-text (that is, in your assignment answer) copied material must note the
original author, publication date, and page number from which the material was copied. Full
details of referenced work must appear in your bibliography at the end of the assignment
answer. Note that you cannot escape this obligation by merely altering a few key words.
It is acceptable (and often helpful) to discuss the issues raised in assignments with other
students. To this end you may freely discuss, ask and answer questions that promote
learning. However it is not acceptable to:
Divide the work required to complete an assignment between a number of classmates,

so that each person does only part of the whole.
Copy another students work, or an answer obtained from another source (including
suggested answers from prior years).
Allow another student to copy your work or provide fellow students with copies of your
assignments.
In this regard, please note that your assignment may be scanned and submitted to scrutiny by
a proprietary software package designed to detect plagiarism.
Where the work of one student is submitted as the work of another, the original author and
the copier will both be penalised.
Note that if the assignment calls for an essay, report, a discussion, an outline, or an
explanation the weight of the marks given for any answer will be apportioned to that part of
the answer that represents the students own, original work. Quotes should not form the bulk
of such work and assignments that are unduly dependent upon quoted material will attract
poor marks even where adequately referenced. For guidelines on referencing, please refer
to the section on Referencing in this guide (under the section dealing with the library).
We draw your attention once again to the Honesty Declaration on the School of
Accountancy cover page that you are required to sign and submit with all assignments (see
pg 12). The purpose of this declaration is to make sure you are aware of the University
requirements regarding academic ethics, dishonest and plagiarism and to emphasise the
importance attached to these requirements.

Assignment 1
Due Friday 21st August 2009
This assignment must be submitted for marking by all Internal and

Extramural students
You are required to consider the attached audit report and then answer the questions which follow.
As a guide, answers should not exceed 30 words per mark ie. 150 words per 5 marks. NB: This is
a maximum not a target, if you can address the question properly in fewer words, that is
acceptable.
Ensure you explain your answers in your own words.
Question 1: Type of Audit Report

State whether this is a qualified, a modified, or an unqualified audit report and give reasons
explaining your answer.
(5 marks)
Question 2: Demand for Audits

Briefly explain what the implications of this audit report are in terms of satisfying the
demand for an audit of Dominion Finance Holdings Ltd. Your answer should consider the
demand for an audit as explained by the following theories (use these as headings in
structuring your answer):
a) Agency Theory,
b) The Information Hypothesis,
c) The Insurance Hypothesis
(10 marks)
Question 3: The Audit Process

The audit report is the main end product of the audit process. Provide a brief overview/
explanation of the audit process. Illustrate your understanding of the phases/steps in the
audit process with brief references to the Dominion Finance Holdings Ltd circumstances
and how these might impact on the audit process.
(15 marks)
Assignment 1 continued over next two pages

Assignment 2
Due Wednesday 30th September 2009
This assignment must be submitted by Extramural students only
You are required to answer all four questions below. Each answer should not exceed 200 words.
NB: This is a maximum not a target, if you can address the question in less than 200 words that is
acceptable.
Ensure you explain your answers in your own words.
Question 1: Pronouncements & Statute governing Auditing

Briefly explain the key pronouncements and statutes which govern the audit of external
financial statements in New Zealand
(5 marks)
Question 2: Negligence
Briefly explain the concept of negligence as it applies to auditors. Ensure you explain
what must be proven for an auditors work to be held negligent.
(10 marks)
Question 3: Independence
Briefly explain the role of independence in auditing. Ensure you explain what can
compromise the independence of an auditor.
(10 marks)
Question 4: Client Acceptance
Briefly explain why it is important for an auditor to carefully assess any potential audit
client before accepting them as a client.
(5 marks)

Postings, Courses, Contacts
> Posting of Materials

In this posting you will receive:
Administration Guide
Study Guide
> Contact
Please make an appointment to meet with a campus coordinator, or you can phone, fax, or
email us your queries to us if you prefer. 1
The 110.279 staff do not monitor the WebCT chatroom, and will not respond directly to
issues raised in that forum. If you have a specific query or need, please contact the
appropriate coordinator for your campus/mode by email, normal post, telephone or, if on
campus, make an appointment for a personal meeting.
If you telephone, but are unable to contact the required member of the 110.279 teaching
team, leave a message on voice-mail or with one of our secretaries:
Auckland 09 414 0800 ext. 9220 or ext. 9589
Palmerston North (06) 356 9099 ext. 2199 or (06) 356 9099 ext. 2196;
Wellington 04 801 5799 ext. 6877
If your enquiry cannot be dealt with immediately, be sure to provide a contact number so
that we can get back to you. It is also helpful if you provide a broad indication of the nature
of your query so that we do not have to waste your time when we first respond.
If you elect to write to us, if possible, please include a telephone (or fax, email) number at
which you may be contacted.
Teaching staff on the various campuses intend to use the following means to communicate
with students outside of formal classes:
1
See the section entitled Paper and Campus Co-ordinators for contact details concerning and preferred
times for contacting staff members on individual campuses.

Albany Students. Additional information concerning paper 110.279 will be posted on
Albanys WebCT site and on the notice board adjacent to QA 3.48. Students are expected to
regularly check both resources for 110.279 related information.
Extramural Students. Extramural students will be informed of any significant changes to

the course by post and by Web CT.
Palmerston North internal students. Additional information concerning the 110.279 paper
that is relevant to internal students , e.g. administrative changes and assignment marks etc.
will be posted on the 110.279 notice board located outside room 1.03 in the Social Science
Tower and on WebCT. Make a habit of regularly checking this board for 110.279 related
information.
Wellington Students should consult the notice board on F floor in Block 5. Students are
expected to regularly check this board for 110.279 related information.
All students should also carefully examine returned assignments and test scripts for
additional information which may be attached.
> Extramural Students Contact Course

Supplementary tuition for extramural students is by way of a Contact Course that is to be
held on 25th of August, 2009, starting at 9.00am. Attendance is highly recommended. This
course is dependant on student numbers. In cases where interest in a contact course is very
low, NSATS reserves the right to cancel the course altogether. The date might also change.
Accordingly, students should contract NSATS to confirm the on-campus course date before
making any travel arrangements to attend the scheduled on-campus course. Moreover, if
you plan to attend the Contact Course, you should ensure that you register your intention
with NSATS at least three weeks prior to the courses commencement. NSATS will advise
extramural students (who have registered for the contact course) of venues, classrooms and
times.
If you are in any doubt as to the arrangements for the Contact Course please telephone 0800
MASSEY (0800 627 739) in the first instance or the Contact Course Administration Office
(ext.: 7984). Teaching staff are usually not involved in, or aware of, these administrative
arrangements. If all else fails, do contact one of the teaching team for advice.
At this stage we do not plan to distribute any additional study material at the Contact
Course. However, if any such material is distributed at the Contact Course it will also be
placed on WebCT. This includes copies of lectures given at the Contact Course.
Note that contact between staff and extramural students is not limited to the Contact Course.
Students may contact the appropriate on-campus staff during office hours at any time during
the semester in order to resolve queries relating to the course material. Extramural students
who may be on campus for any reason are welcome to attend internal lectures.

> General Contacts
Problem Contact
I have changed my address Phone Massey Contact 0800 MASSEY (627739) or

write to the Enrolment Office (copy to Paper
Coordinator)
Did you get my assignment? Phone Massey Contact 0800 MASSEY (627739)
I think Ive missed a posting Phone Massey Contact 0800 MASSEY (627739)
Im not sure about the Contact Course Phone the Extramural coordinator, Extn 2157
I dont understand the assignment Phone your Campus Coordinator (see pg 2 for contact
details for each campus and for Extramural)
I think my grade is incorrect Phone your Campus Coordinator (see pg 2 for contact
I think I should withdraw Phone your Campus Coordinator before proceeding

(see pg 2 for contact details for each campus and for
Extramural).
I am going to withdraw Phone Massey Contact 0800 MASSEY (627739) or

write to the Enrolment Office (copy to Paper
Coordinator)
(If you have the Reg Workbook use the Application

For Change of Papers or Programme form)
I am having trouble/help!! Phone your Campus Coordinator (see pg 2 for contact

For general Massey University enquiries, phone 0800 MASSEY (0800 627739) or email
contact@massey.ac.nz as your first point of call. Note that the 0800 numbers are only valid for
New Zealand based callers. Overseas students should call +64 63505701.
> Complaints
If you have any concerns or complaints about this paper, you should contact the Paper
Coordinator in the first instance. If the Paper Coordinator is unable to resolve the matter or if
you feel uncomfortable bringing this matter to the Paper Coordinator, you should contact the
Head of School.

Internet Resources
> WebCT
Your online learning environment
This paper makes use of the internet to help create an "online learning environment. At
Massey University we use WebCT (Web Course Tools) as the preferred online learning
environment.
The facilities in WebCT are comprehensive and allow for on-line discussions, real-time chat,
course information, participant homepages, schedules, and links to other sites and resources
on the internet. In addition, it enables material that supplements the set text and study guide
to be disseminated, for example: lecture notes, issues for consideration and discussion, and
supplementary worked examples.
This paper is Web-Enhanced which means that you are expected to access the additional
online materials and resources. Access is recommended, as online participation is likely to
make a significant contribution to your study.
> Discussion Forums

While the 110.279 teaching staff monitor discussion forums, they do not normally respond
or get directly involved in web discussions. The reason is that this forum is intended as a
forum for student discussion. Students who have specific queries should contact their
Campus Coordinator directly (see pg 2 for contact details for your Campus Co-ordinator).
> Internet Links
From time to time, important information (e.g., employment opportunities, School of

Accountancy Handbooks, etc.) will be placed on the School of Accountancy home page for
general dissemination http://www-accountancy.massey.ac.nz/ . This site will also provide
notice of any technical problems that the WebCT site might be experiencing.
The following School of Accountancy Handbooks can be downloaded from the Schools
website. Each contains detailed paper descriptions and contact information for Paper
Coordinators.
Undergraduate Handbook
Postgraduate Handbook

Two other useful links are those of the two main professional accounting bodies in New
Zealand:
The New Zealand Institute of Chartered Accountants:
http://www.nzica.com/AM/Template.cfm?Section=Home1
CPA Australia:
http://www.cpaaustralia.com.au/cps/rde/xchg/SID-3F57FECB-
558BB8CB/cpa/hs.xsl/Index.html
> Accessing the Online Resources

In your web browser enter the following web address exactly as shown:
http://webct.massey.ac.nz
Click on here for

WebCT LOGIN

Your WebCT username will
generally be in the form of your:
Student ID Number and
password will be the 4 digit pin,
issued to you on conformation
of enrolment.
It will be the same for all papers
you are enrolled in.
Enter you WebCT Student ID Number and your WebCT password (4 digit pin). If you have
previously changed your password, your new password will need to be entered.
This will take you to your myWebCT page, which will list all the WebCT courses you are enrolled
in.
To enter the WebCT site, click on the paper name. You will then be greeted with the home page.
Any queries: Phone 0800 MASSEY (627 739)

Email: contact@massey.ac.nz
Contact hours of operation are
8.30am to 5.00pm Mondays Fridays

Library and Referencing
> Library Service

Using Massey Libraries in person
Youre welcome at any of the Massey Campus Libraries (in Auckland, Napier, Palmerston
North, and Wellington). Many services are available from these Libraries, including: access to
the Librarys electronic resources, help desks for providing solutions to individual problems,
and research consultations for postgraduate students.
The Library Web Site
You can use the Library Web Site (http://library.massey.ac.nz/ ) to find useful resources by:
searching KEA (the Library catalogue) to find and request books held,
using subject guides to identify relevant electronic resources, and
searching databases to find journal articles on your topic.
The Librarys Delivery Service
The Distance Library Service delivers course related Library materials to the homes of eligible
students (usually students studying predominantly extramural or block mode courses). The
Library produces a booklet each year that gives key information about using the Distance
Library Service. If you are uncertain about your eligibility, and/or you need a copy of the
booklet, please contact the Distance Library Service.
Contacting the Library
Full contact information and Library hours are available on the Library Web site:
http://library.massey.ac.nz , or contact us at:
Distance Library Service Ruawharo Campus Library

Ph (06) 350-5670 ext. 2550 120 Tamatea Drive, Napier.
Email: LibExtm@massey.ac.nz Ph (06) 834-4586
Albany Campus Library Turitea Campus Library

Temporary Library Building, Gate 1 Tennent Drive, Palmerston North.
State Highway 17 Ph (06) 350-5670
Albany, Auckland. Ph (09) 443-9797
Hokowhitu Campus Library Wellington Campus Library

Centennial Drive, Palmerston North. Block 5, 63 Wallace Street, Wellington.
Ph (06) 351-3330 Ph (04) 801-2794 ext. 6460

> Citing References
The reference system used should enable you to indicate the source of facts and opinions
without interrupting the flow of your argument, and it must enable a reader to check and
pursue these citations quickly and economically. These guidelines are based on the APA
(American Psychological Association) referencing system. APA (2001). Publication manual
(5th ed.). Washington, DC: American Psychological Association.
When a reference is made in the body of the assignment it is sufficient to mention the name of
the author, the year of publication, and the page number, e.g.:
..it has been urged (Kotler, 1986, p.9) that , or

..it has been urged by Kotler (1986, p.9) that
Cite electronic sources as for other texts. Where page numbers are not provided, use the
paragraph number, if available, preceded by the paragraph symbol or the abbreviation para. If
neither paragraph nor page numbers are visible, cite the heading and the number of the
paragraph following it to direct the reader to the location of the material.
.. Myers (2000, 5) believes.., or
.. (Beutler, 2000, Conclusion section, para. 1)..
Reference List
All references cited in the text must be reported in full standard bibliographical form under a
heading References at the end of the assignment.
The references should be arranged alphabetically by authors surname. When listing

references, all lines except the first should be indented five spaces (typically one tab stop).
Note the use of italics (or underlining), capitalisation, punctuation and order of elements. For
a book, italics should be used for the title. For journal articles, the title of the journal, and the
volume number, should be italicised. If your word processor or printer cannot do italics,
underline these elements.
The preferred format for different types of publications is as follows:
Books
Sligo, F. (1991). Organisational behaviour: Case studies and commentaries. Palmerston

North, New Zealand: Dunmore Press.
Strunk, W., & White, E.B. (1979). The elements of style (3rd ed.). New York: Macmillan.
Stephenson, J. (Ed.). (2001). Teaching and learning online: New pedagogies for new
technologies. London: Kogan Page.
Ramsden, P. (1997). The context of learning in academic departments. In F. Martin, D.

Hounsell, & N. Entwistle (Eds.), The experience of learning (2nd ed.) (pp. 198-216).
Edinburgh, Great Britain: Scottish Academic Press.

Periodicals
Becker, L.J., & Seligman, C. (1981). Welcome to the energy crisis. Journal of Science Issues,
37(2), 1-7.
Ferguson, I.S. (1973). Forecasting the future for timber. The Australian Journal of
Agricultural Economics, 18, 562-578.
Emerson, A-M. (1991, December 10-17). Bald is beautiful. The Listener, p.16.
Battling the stress monster. (1996, June/July). Safeguard, 17-22.

N.B. use this style when no author is identified or use (n.a.) where authors name would
usually be, date then title.
Occasional publications
Irons, B. (1996, April). Quality study guides. Paper presented at the DEANZ Conference,
Queenstown.
Wifley, D. E. (1989). Interpersonal analysis of bulimia: Normal-weight and obese.

Unpublished doctoral dissertation. University of Missouri, USA.
Electronic Periodicals
Stiles, P. (2001). The impact of the board on strategy: An empirical examination [Electronic
version]. Journal of Management Studies, 38(5), 627-650.
Campbell, I. (2003). The obesity epidemic: Can we turn the tide? Heart, 89(Suppl. 2), ii22-
ii24; discussion ii35-ii37. Abstract retrieved May 21, 2003, from MEDLINE database.
Internet
All references begin with the same information that would be provided for a printed source (or
as much of that information as possible). The web information is then placed at the end of the
reference. It is important to use Retrieved from and the date because documents on the web
may change in content, move, or be removed from a site altogether.
Jacobson, J.W., Mulick, J.A., & Schwartz, A.A. (1995). A history of facilitated
communication: Science, pseudoscience, and antiscience: Science working group on
facilitated communication. American Psychologist, 50, 750-765. Retrieved January 25,
1996, from: http://www.apa.org/journals/jacobson.html
Health of older people in New Zealand. (n.d.). Retrieved May 21, 2003 from
http://www.moh.govt.nz/olderpeople
N.B. (n.d.) = no date
Court Reporter. (2002, November 21). Alcohol-fuelled driving appals judge. Manawatu
Evening Standard. Retrieved May 21, 2003, from
http://www.stuff.co.nz/stuff/eveningstandard/0,2106,2489959a6502,00.html
Stephens, D. (2003, April 24). Why do some people have such a need for control? [Msg 430].
Message posted to http://groups.yahoo.com/group/abuse-survivors-with-ptsd/message/430

Final Examination
> Final Examination Important Details & Regulations
1. Please consult the official Massey examinations timetable (published and

distributed by the University later in the semester) to confirm the date, time and
venue of the final examination. The final examination will be three hours long.
2. To achieve a pass in paper 110.279 you must obtain at least a 40% sub-minimum
in the final examination - if you do not get at least 40 out of a possible 100 marks
in the final examination, you will not pass the paper!
3. As the non-examination assessments for this paper are worth only 30%, an
Aegrotat pass is not available if you fail to attend the final examination. If your
performance in the examination is seriously impaired by illness, injury,
bereavement or other critical circumstances, you may, after the examination, seek
an Impaired Performance consideration. For the Universitys rules in this respect,
please see http://calendar.massey.ac.nz/
4. The following University regulations apply to aegrotat consideration where a
student is unable to attend the final examination:
Although AEG passes will not be awarded in cases where less than 40% of the
total assessment for the paper has been completed by the student; students who
make satisfactory Aegrotat applications in such papers may receive a Not
Finalised status for the paper in question, and be permitted to sit the examination
(or other fixed time/place assessment) at the next offering of the paper at their
campus of study. (Assessment and Course Work, Regulation 4(a), Massey
University Calendar 2009).
5. Note that after 2008 students will not be able to carry-forward course work.
> The 2009 Examination and Past Examination Papers

As noted in the Introduction to this Guide, some significant changes have been made to
this paper for 2009, including changes in the nature of questions used in tutorials, tests and
the final examination. These questions will emphasise your understanding of important
concepts rather than your ability to recall information, as has been the case in past years.
Because the 2009 final examination will differ fairly significantly from final examinations of
previous years, we have included a Sample Examination paper in this Administration
Guide, rather than past examination papers. This and the tutorial questions set for each
weeks work are intended to give an indication of the types of questions that may be
expected in the final examination.
If you do wish to look at past examination papers, these can be accessed from the library
website.

> Sample Examination Paper
MASSEY UNIVERSITY
SAMPLE EXAMINATION FOR
110.279 AUDITING
Semester Two October/November 2009

_____________________________________________________
Time Allowed: THREE (3) hours
Reading Time: TEN (10) minutes
THIS EXAMINATION IS WORTH 100 MARKS IN TOTAL
NO REFERENCE MATERIAL IS ALLOWED FOR THIS EXAM
NON-PROGRAMMABLE CALCULATORS ARE PERMITTED
This exam comprises 10 questions. Answer all questions in the blue answer book.
SCHEDULE OF QUESTIONS Marks Suggested Time

Q1 Auditing, Assurance and the Profession 10 18 minutes
Q2 Legal Environment 15 27 minutes
Q3 Professional Ethics and Conduct 10 18 minutes
Q4 Client Evaluation and Planning 10 18 minutes
Q5 Business and Audit risk Assessment 8 14 minutes
Q6 Materiality and Evidence 10 18 minutes
Q7 Tests of controls 10 18 minutes
Q8 Designing Substantive Procedures 7 13 minutes
Q9 Governance and Assurance Services 12 22 minutes
Q 10 Overview of the Audit and Audit Report 8 14 minutes
TOTALS: 100 180 minutes
Unless otherwise stated, audit or auditor refer to external financial statement audits.

Question 1: Auditing, Assurance and the Profession
The roles of internal and external auditor have some similarities and some differences.
Required
Compare and contrast these two roles in a tabular format under the headings of independence,
nature of work, quality standards, legislation, and professional status. (Leung, 2009)
Q1: 10 marks
Question 2: Legal Environment

There are two statutes in New Zealand, which are accepted as governing the audit requirements for
most of the publicly accountable entities in New Zealand. These statutes include several
requirements which seek to promote and safeguard the independence of auditors.
Required:
i. Identify the two main statutes referred to above.
1 mark
ii. Explain briefly which entities are required, by these two statutes, to have their financial
statements audited
4 marks
Iii Identify and explain five different ways in which the two statutes referred to above seek to
promote and safeguard auditor independence.
10 marks
Q2: 15 marks
Question 3: Professional Ethics and Conduct

You have been asked to consider the following scenarios concerning ABC (an audit firm) and
Company Ltd (its client):
1. ABC firm is the auditor of Company Ltd and has been for 10 years. During this time, the
audit partner responsible has always been John. The other partner in the firm, Robert, has
been the review auditor for this assurance engagement. Robert has not been the lead audit
partner as his wifes father is the CEO of Company Ltd.
3 marks
2. Every year Company Ltd celebrates the end of the audit by throwing an all expenses paid
weekend away for their staff that worked on the audit and for the audit firm. This has led
to a good relationship between the auditors and the company that makes the audit less
formal. Staff all know each other well and the company believes it is money well spent.
1 marks

3. Recently John was approached by the board of Company Ltd with an offer of employment
as a director starting in two years time. The only condition was that the audit fees have to
be reduced for the current and next years audit.
1 marks
4. ABC is promoting a new issue of shares from Company Ltd.

1 marks
5. The audit must cover Company Ltds inventory valuation system which was implemented
by ABC after last years audit.
2 marks
Required:
Identify any threats to compliance with professional ethical requirements and explain briefly why
the scenarios constitute threats.
(Leung, 2009 - Adapted)
Q3: 10 marks.
Question 4: Client Evaluation and Planning

Your client is Gateshead Ltd, a large family-owned company which imports and sells computer
hardware products. You are planning the 30 June 2009 audit and, from your enquiries of
management, have obtained the information below:
1. In January 2009, Gateshead applied for and was granted a new loan. The submission
made to the bank stated:
the current ratio was 0.90
gross profit was up by 25% compared with that at the same time last year
the debt-to-equity ratio was 0.40.
2. The bank agreed to the new loan but did enter into a loan covenant with Gateshead.
The covenant required that the company should not breach certain ratios and placed
certain restrictions on dividends.
From audits you have conducted in previous years, you are suspicious about the validity of the
ratios discussed in the submission. You hear from one of the Gatesheads accounting staff that the
figures had been gently massaged to obtain the required ratios.
Required:
Discuss (referring to specific areas of the audit) the implications of this information on your
planning of the audit.
(Leung, 2009)
Q4: 10 marks

Question 5: Business and Audit risk Assessment
Control activities are detailed policies and procedures that management establishes to help ensure
that its directives are carried out.
Required:
Briefly explain the four different categories of control activities and give an example of each.
(Leung, 2009)
Q5: 8 marks.
Question 6: Materiality and Evidence

Specific auditing procedures for obtaining audit evidence are listed below:
1. Send debtors confirmation letters to a number of the clients customers.
2. Recalculate depreciation charges.
3. Calculate gross profit ratios for the current year and preceding year.
4. Discuss the potential obsolescence of inventory with the management.
5. Examine registration certificates for motor vehicles purchased during the year.
6. Use the computer to scan a file to determine that all documents in a numbered series
have been accounted for.
7. Learn about a possible lawsuit in conversation with the financial controller.
8. Obtain a valuation of land held by the company.
9. Observe the year-end inventory count.
10. Select a sample of repairs and maintenance expenses and check whether any should
have been capitalised.
Required:
Indicate:
a) the type of evidence obtained by each procedure, and
b) the assertion or assertions to which it pertains.
(Leung, 2009)
Q6: 10 marks

Question 7: Tests of controls
Your firm has been engaged to audit the financial statements of Haven Ltd. In obtaining an
understanding of internal control relating to credit sales, the following questionnaire is used:
1. Does the company evaluate the customers credit history, and is the amount of
available credit checked before a sale is authorised?
2. Is there adequate segregation of duties between authorising sales, shipping goods, and
recording sales?
3. Does management compare all shipments with recorded sales to ensure that all sales
are recorded?
4. Is every recorded sale checked against shipping records for appropriateness of revenue
recognition?
5. Are there adequate controls over the accuracy of the sales invoice?
6. Are there adequate controls to ensure that the sales invoices are recorded in the correct
time period?
7. Are there adequate controls to ensure that the proper customer is invoiced for
shipments?
8. Does management review all sales that are recorded on a weekly basis?
9. Do adequate controls exist to review company accounting policies regarding revenue
recognition?
10. Do adequate controls exist to review the consistency of the estimation of the allowance
for doubtful debts?
Required:
Identify a possible test of control procedure, assuming a Yes answer to each question above.
(Leung, 2009)
Q7: 10 marks

Question 8: Designing Substantive Procedures
Victor Salin is an audit senior carrying out the planning of the audit of GrowWell Ltd, an importer
of hydroponic equipment for the market garden industry. The owners of GrowWell complained to
the partner on the audit engagement that the audit fee was too high. The audit partner, Kelly Yeo,
was concerned about losing this client so she decided to cut 10% off the fee for the audit an
amount of $2,000.
Kelly decides that the amount of work performed on the client would have to be reduced to cover
this discount, but she felt this was reasonable because the inherent risk and control risk had always
been good.
Kelly calls Victor into her office and says that she wants to avoid performing debtors and creditors
circularisations as they have done in previous years. Her reason is that following up non-responses
is an expensive and time-consuming task and that it would be more efficient to use alternative
audit procedures. She also tells Victor that the sample size for selecting debtors and creditors
balances for testing should be reduced, given that they have had few problems in those parts of the
audit in previous years.
Required:
a) List what factors Kelly should have considered in changing the nature and extent of
the substantive audit testing.
b) Discuss any special considerations in relation to the audit procedures that should be
performed in auditing debtors and creditors.
(Leung, 2009)
Q8: 7 marks
Question 9: Governance and Assurance Services

Since the spate of corporate collapses around the turn of the century, there have been numerous
reforms, including an increased emphasis on the importance of good governance.
Required:
i. Briefly explain the concept of Enterprise Governance and how governance differs from
management.
5 marks
ii. Briefly explain any four principles for corporate governance best practice relating to audit
committees and relationships with auditors that have been set out in the New Zealand
Stock Exchanges Corporate Governance Best Practice Code.
4 marks
iii. Briefly describe any three assurance services other than audits of financial statements,
which may be used by governing bodies to assist in promoting good corporate governance
3 marks
Q9: 12 marks
Question 10: Overview of the Audit and Audit Report
The Audit Report on the page which follows this question (Appendix 1), was extracted from
http://www.caci.co.nz on 1 August 2006. Answer the following questions relating to the extract:
i. Comment on the significance of an Unqualified Opinion.

2 marks
ii. Each element of the audit report has significance and is there for a specific purpose.
Comment on the significance/purpose of the following statements:
(a) The introductory paragraph (i.e. We have audited the financial statements on
pages . accounting policies set out on pages 10 and 11.),
2 marks
(b) Statements of responsibility (i.e. directors responsibilities and auditors

responsibilities),
1 mark
(c) The date the audit was completed and the opinion expressed
(i.e., . 12 July 2006 .)
3 marks
Q10: 8 Marks
[Total for this examination; 100 marks]

++++++++

Appendix 1 CACI Group, extract from 2006 annual report
Auditors Report


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School of Accountancy

Extramural & Internal

Posting, Courses & Contacts

Library and Referencing

110.279 Administration Guide 1

Paper Co-ordinator and Albany Campus Co-ordinator:

Postal Address School of Accountancy

Palmerston North (Internal) Campus & Extramural Co-ordinator:

Postal address School of Accountancy

Wellington Campus Coordinator:

Postal address School of Accountancy

110.279 Administration Guide 2

> Topics Covered

110.279 Administration Guide 3

Ordering of Text Books

Bennetts University Book Centre

110.279 Administration Guide 4

Assignment Due Date Weighting

Test (Internal students only) Saturday

> Studying Auditing

Understanding is the key to success in 110.279. To achieve understanding requires

110.279 Administration Guide 6

> Massey University Credit System from 2007

110.279 Administration Guide 7

Text Reference (Leung 4th Edition)

5 10/08/09 Professional Ethics and Conduct. Study Guide Readings:

6 17/08/09 Client Evaluation and Planning Ch. 6

Mid-Semester Break w/c 24/08/09 & 31/08/09

8 14/09/09 Materiality & Evidence Ch. 8

9 21/09/09 Tests of Controls Ch. 9

10 28/09/09 Designing Substantive Procedures Ch. 10

12 12/10/09 Other Assurance Engagements Ch. 17.(excl 17.5)

110.279 Administration Guide 8

Additional Workshops & Clinics on the Timetable

110.279 Administration Guide 9

2. Due dates appear below:

Assignment 1 (compulsory for all students)

Test (only required/ compulsory for internal students)

Assignment 2 (only required/ compulsory for extramural

Presentation of Written Work

All written work must be submitted on A4 (21cm x 29.7cm) sized paper.

110.279 Administration Guide 10

Assignment Submission & Honesty Declaration

Retain a copy of any assignment submitted for assessment.

For Extramural students

Palmerston North based students and all Extramural students

You may hand-deliver assignments to the NSATS Assignments

NSATS Assignments Office

110.279 Administration Guide 11

Lecturers Name Paper Number Paper Name

Family Name Given Name(s) ID number Student Signature Date

110.279 Administration Guide 12

Assignments submitted by email must be attached to the email as a Word document.

110.279 Administration Guide 13

Due Dates, Extensions and Penalties

110.279 Administration Guide 14

Divide the work required to complete an assignment between a number of classmates,

110.279 Administration Guide 15

This assignment must be submitted for marking by all Internal and

Question 1: Type of Audit Report

Question 2: Demand for Audits

Question 3: The Audit Process

Assignment 1 continued over next two pages