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THE INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN EXAMINERS COMMENTS SUBJECT Advanced Auditing General The performance in this paper

was average. The problem with majority of the students was that they were unable to organize their answers in a logical order which would have allowed them to cover all the relevant points. For example, in question 3, the majority only covered the situations in which there is a disagreement between the auditor and the client. The implications on the auditors report when client agrees with the auditor were seldom mentioned. Similarly, while drafting audit program on taxation, the steps related to current and deferred taxation and those related to payment of tax were all mixed up and as a result quiet a few steps were ignored. Question-wise comments are given below: Q.1 (a) This part of the question was fairly well answered by majority of the students. Most of the students failed to clearly describe the key areas on which emphasis is required to be placed which included impairment testing of subsidiary, analysis of current assets and current liabilities, need to employ a valuer for valuation of stocks and evaluation of going concern assumption. At this stage of their career, such a response was really alarming. This was an easy question. However, a large number of students were unable to specify the matters which Quail & Company should consider while deciding upon the need to hire a firm of IT consultants. The students were expected to highlight the following matters: (b) The degree of complexity of the clients system How much audit evidence is available through electronic form The extent to which the data is shared among different applications The changes that have been made to the existing systems and new systems that have been put into operation, if any Clients plans to use emerging technologies SESSION Final Examination - Winter 2010

(b)

Q.2

(a)

This was the easiest of questions and almost all students did well.

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Examiners Comments on Advanced Auditing Winter 2010 Examination Q.3 In this question the students were supposed to give their views on three situations. The mistakes noted in majority of the answers are discussed hereunder: Situation 1 Generally the students demonstrated reasonable knowledge about the action to be taken by the auditor and the implications on the audit report. However, a vast majority missed an important point that if management agrees to change the accounting policy, the auditor should give a concurrence statement in audit report. Situation 2 Majority of the students could not mention that the auditor should ask the management to make a provision of Rs. 10 million as it is the minimum amount of payment which the company would be required to pay. Further, very few could identify that even if a provision is made and the matter is appropriately disclosed by way of a note, the auditor may add an emphasis of matter paragraph to the report. Situation 3 The situation was quiet simple and a large majority was able to answer correctly. Q.4 Majority of the students were able to draft the report correctly as they adopted the format specified in ISRE 2400. However, a large majority was not able to adequately draft the qualifications. Some of the students did not write the complete report i.e. left some parts of the report such as title, date, place etc. and lost the related marks. A large number of students did not mention in the review report that the financial statements of Sparrow (Private) Limited for the year ended September 31, 2009 were unaudited. Q.5 In the shape of this question there was an opportunity for the students to secure good marks. Surprisingly, the students failed to demonstrate their practical knowledge and missed some of the very important procedures as noted below: Contingent Liabilities Discuss with management the clients policies and procedures for determining the estimated financial effect of contingencies. Examine the policies and procedures that the client has in place to monitor compliance with laws and regulations. Check the basis of measurement of the contingencies. Ensure that provision has been made against all items that meet the relevant criteria as mentioned in IAS 37.

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Examiners Comments on Advanced Auditing Winter 2010 Examination Taxation Compare balances represented as being per book with the general ledger. Investigate any differences. Test the significant add backs/ deductions appearing in the computation. Study correspondence with tax advisor(s). Evaluate tax contingencies and ensure that these have been appropriately accounted for and disclosed in the financial statements. In respect of deferred taxation, check the calculation of major timing differences especially in respect of depreciation and amortization, provisions, revaluation of fixed assets etc. Review and check prior years tax charge, if any.

Q.6

This was an easy question and a large number of students were able to correctly demonstrate their knowledge relating to Code of Ethics for Chartered Accountants and Code of Corporate Governance.

(THE END)

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