IGNOU| ELEMENTS OF AUDITING (ECO - 12)| SOLVED PAPER – (DEC - 2023)| (BDP)| ENGLISH MEDIUM
BACHELOR’S DEGREE PROGRAMME (BDP)
Term-End Examination
December - 2023
ECO-12
ELEMENTS OF AUDITING
Time: 2 Hours
Maximum Marks: 50
Note: Attempt any five questions. All questions carry equal marks.
हिंदी माध्यम: यहां क्लिक करें
1. Discuss the secondary objectives of an audit. 10
Ans:- The secondary objectives of audit are
incidental to the satisfaction of the main objective of audit.
These
objectives are:-
1.
Detection and prevention of errors:-
(i) Errors
refer to unintentional mistakes in financial information arising out of
ignorance of accounting principles or negligence of accounting staff.
(ii) Types
of errors include:-
(a)
Clerical errors (posting, totalling and balancing errors)
(b) Errors
of omission (complete or partial omission of transactions)
(c) Errors
of commission (deliberate mistakes in recording, posting or casting)
(d)
Duplicating errors (entries made twice)
2.
Detection and prevention of fraud:-
(i)
Detection of material fraud and errors as an incidental objective of
independent financial audit flows out of the main objective of determining
whether the financial statements give a true and fair view.
(ii)
Errors and fraud can cause the financial position to be misrepresented, and the
auditor should take into account the possibility of their existence.
These
secondary objectives are important to ensure the reliability and accuracy of
the financial statements, which is necessary for stakeholders to make informed
decisions.
2. What are the essential points that must be kept in view at the
time of installing the system of internal check? 10
Ans:- While setting up a system of internal checks, the following
essential points should be kept in mind:-
(i)
Division of work:
(a) Divide
the tasks among employees to ensure that no single person has complete control
over a particular process.
(b) It
helps prevent errors and fraud by providing multiple checks on each
transaction.
(ii)
Provision of checks:
(a) Ensure
that each task is checked by another employee to prevent errors and fraud.
(b) This
can be achieved through job rotation, where employees are moved to different
roles from time to time.
(iii) Use
of equipment:
(a) Use
modern equipment and machines to streamline internal checks and reduce manual
errors.
(b)
Examples include time record machines and pay fixation machines.
(iv)
Self-balancing system:
(a)
Implement self-balancing ledgers to facilitate easy checks and reduce errors.
(b) It
ensures that the system is self-correcting and efficient.
(v) Job
rotation:
(a) Rotate
employees through different roles to prevent familiarity and specialisation,
which can lead to manipulation.
(b) This
helps maintain a culture of accountability and honesty.
(vi)
Specialisation:
(a)
Provide training to employees to ensure they have the skills required to
perform their tasks effectively.
(b) This
increases the overall efficiency and effectiveness of the internal check
system.
(vii)
Controls:
(a)
Establish clear authority levels and ensure that each employee is accountable
for their actions.
(b) This
helps prevent unauthorised access and ensures that all transactions are
properly recorded.
(viii)
Authority levels:
(a) Define
clear authority levels and ensure that each employee's responsibilities align
with their authority.
(b) This
helps maintain a culture of accountability and ensures that all transactions
are properly authorised.
(ix)
Review:
(a)
Regularly review the internal checks system to identify areas of improvement
and ensure that it remains effective.
(b) It
helps maintain the integrity of the system and prevent errors and fraud.
(x)
Supervision:
(a) Ensure
that all internal checks are strictly monitored to prevent deviations from
established procedures.
(b) It
helps maintain the integrity of the system and prevent errors and fraud.
By considering
these essential points, you can effectively establish and maintain a strong
system of internal checks that helps prevent errors and fraud, promote
accountability, and ensure the integrity of your organization's financial
records.
3. (a) What are the main items to be incorporated in drafting an
Audit Programme? 5
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