The auditors experience will enable him to make recommendations on ways of

The auditors experience will enable him to make

This preview shows page 128 - 130 out of 266 pages.

The auditors experience will enable him to make recommendations on ways of improving the accounting and the internal control system. An audit assists in the prevention and detection of errors and frauds through the moral and deterrent effect of an audit. c) Directors have the following responsibilities in relation to the compan y‟s accounting system Responsibility to put in place a system that will ensure proper accounting records are maintained. The Companies Act requires management to keep proper books of accounts, this is only possible with a proper accounting systems; They are responsible for ensuring that appropriate controls are put in place within the operation of the accounting system; Responsibility to continuously review the operation of the controls to ensure that they are adequate for the operations of the company; To ensure that the accounting system and the internal control system safeguards the company‘s assets. KASNEB PANEL ● R EVISION K IT
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119 Revision Questions and Answers d) Limitations of an audit It is not possible to detect all the frauds and errors that might have taken place during the year; Management might fail disclose to the auditor some of the information that is needed; An audit is carried out on a test basis. It might not therefore be possible to examine all the transactions. The samples selected might not be representative of the population; Time limit placed on the auditor‘s work. This could limit the amount of work to be performed. QUESTION TWO a) You are required to explain management objectives that an internal control system (ICS) can help management achieve. An ICS enables management to carry out the business in an orderly and efficient manner. Internal controls lay out the various procedures to be followed in conducting the affairs of the organisation. E.g. there will be procedures laying out the procedures to be followed in procuring raw materials to ensure that only necessary materials are procured which meet the quality standards of the company; An ICS ensures that the various policies that have been put in place are adhered to by employees in running the operations of the company; An ICS helps in safeguard the company‘s assets. Some controls are designed specifically to ensure the assets of the company are protected from theft, destruction and that they are used in the best interest of the company. This can either be directly through physical locking up or indirectly through recording. It includes assessing assets and ensuring that any access is authorised. ICS help in ensuring completeness and accuracy of the records maintained. The company‘s Act requires that the management of a company keep proper books of accounts. These records are the basis for the preparation of the financial statements.
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  • Summer '16
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