A direct tax is one whose impact as well as incidence falls on one and the same person while an indirect tax has its impact on one person and incidence is partly or wholly on another person. Examples of a direct tax include income tax, wealth tax, gift tax, inheritance tax and corporation tax. Examples of indirect tax include Value Added Tax (VAT), Sales tax, Customs and excise duties. Note that impact of tax in the case of direct tax is on the person on whom it is legally imposed and the same person pays the tax. In indirect taxation, however, the tax is legally imposed on one person and through tax shifting, it is paid by another person. Direct tax has income as the base while indirect tax is based on expenditure/consumption
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Briefly explain the following terms as used in auditing: Vouching audit, Inherent risk, Control risk and in depth audit tests
Bafu Ltd., a private limited company, manufactures a wide range of bathroom fittings. These fittings are made from steel components which are chromed in small vats. The steel components are sourced from outside suppliers. The year end stock mainly consists of these steel components and finished items. As at 31 October 2004, the total stock was valued at Sh. 6,048,000 out of total assets of Sh. 19,200,000. This stock figure was obtained by a physical count as at 31 October 2004, and valuation by reference to purchase invoices and manufacturing cost estimates. Required: With reference to each of the matters listed below, state the work you would do to conclude whether the amount attributed to stock is fairly stated;Condition of stock items
You are in charge of a group of audit trainees who have just been employed by your audit firm. This is the audit trainees‘ first assignment and they are aware that they are supposed to prepare audit working papers but they do not know how to do so or what information they should include in the audit working paper.‘Required:Provide the audit trainees with guidelines on how they should prepare audit working papers
Bafu Ltd., a private limited company, manufactures a wide range of bathroom fittings. These fittings are made from steel components which are chromed in small vats. The steel components are sourced from outside suppliers. The year end stock mainly consists of these steel components and finished items. As at 31 October 2004, the total stock was valued at Sh. 6,048,000 out of total assets of Sh. 19,200,000. This stock figure was obtained by a physical count as at 31 October 2004, and valuation by reference to purchase invoices and manufacturing cost estimates. Required: With reference to each of the matters listed below, state the work you would do to conclude whether the amount attributed to stock is fairly stated; Quantities
You are in charge of a group of audit trainees who have just been employed by your audit firm. This is the audit trainees‘ first assignment and they are aware that they are supposed to prepare audit working papers but they do not know how to do so or what information they should include in the audit working paper.‘Required: List any four advantages of standardized audit working papers
Bafu Ltd., a private limited company, manufactures a wide range of bathroom fittings. These fittings are made from steel components which are chromed in small vats. The steel components are sourced from outside suppliers. The year end stock mainly consists of these steel components and finished items. As at 31 October 2004, the total stock was valued at Sh. 6,048,000 out of total assets of Sh. 19,200,000. This stock figure was obtained by a physical count as at 31 October 2004, and valuation by reference to purchase invoices and manufacturing cost estimates. Required: With reference to each of the matters listed below, state the work you would do to conclude whether the amount attributed to stock is fairly stated. Identification of stock items
An internal control system is designed to provide reasonable assurance that all the control objectives are being achieved. Required: Identify and briefly explain the three key elements of a good internal control system
You are in charge of a group of audit trainees who have just been employed by your audit firm. This is the audit trainees‘first assignment and they are aware that they are supposed to prepare audit working papers but they do not know how to do so or what information they should include in the audit working paper. ‘Required: Explain the importance of audit working papers
Outline the professional guidelines that would assist the external auditor in avoiding being unduly dependent on a single client
Identify and briefly explain the statutory and ethical matters you would consider before accepting appointment as an auditor of a company
