D-3 Marking Scheme Auditing

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Marking Scheme for Advanced diploma year 111 Auditing and investigation- 6th Semester No. Details Marks a) b) Full mark of 3 Management Consultant is an examination of the health of a will be issued if business by a specialist is called management consultancy. student demonstrate Management consultancy relates only to specific problems and h/his skill in provides solution only to those problems which are posed to it. It management and is problem oriented. is always adhoc while involving ext
  Marking Scheme for Advanced diploma year 111Auditing and investigation- 6 th Semester  No .DetailsMarks a) Question no. one. Total marks =20 marks Management Consultant is an examination of the health of a business by a specialist is called management consultancy.Management consultancy relates only to specific problems and provides solution only to those problems which are posed to it. Itand is problem oriented. is always adhoc while involving externalexperts. (4marks) Full mark of  3 will be issued if studentdemonstrateh/his skill inmanagementconsultancyidea  b) (4 marks) S/No.MANAGEMENT AUDITMANAGEMENT CONSULTANCY 1 Institutional or individualorientedProblem oriented. 2 Overall review of allmanagerial policies, procedures and actionsDealing with specific problems andtheir solutions. 3 Periodical but regularCasual and adhoc 4 Internal expertsExternal experts.   One mark for each point of differentiation betweenmanagementconsultancyandmanagementaudit c) Step one diagnosing the problem - From the data given bycustomer it is clear that gross profit is affected by costs of  production and not sales (as some time sales dropping are thesources of problem but not in this case) a constant increase inmanufacturing costs in clear indication that management is notefficient in production and acquisition of raw material and labor cost. Possible reasons for high costs: 1.It may be is inefficiency in finishing of bottles,2.Raw materials including bottles are purchased at high costscomparatively,3.There is an increase in production cost withoutcorresponding increase in selling prices. What to do then? 1.Client should buy read made bottles and compare the pricewith one that is finished within client factory,2.Raw material should be purchased in big quantity to enjoy bulk discount,3.Pay supplier on time to utilize cash discount,4.JIT stock system if applicable could reduce storage costs.5.Check possibility of increasing selling price but watch outyou competitors   6.Timing of purchase to avoid adverse exchange rate that willrender production costs to rise7.Watch out company’s overheads, uses of Generator shouldavoided unless is necessary.8.Think about changing more automated machines rather thanold version. (12 marks) Here studentis test his/her ability toanalyze thesituation and providinggood solutionon the said problem.Discussionwith examplewill earn mark easily.Answer is justan indicative;student maysite other relevant case . 1Zanzibar Institute of Financial Administration -Chwaka  Marking Scheme for Advanced diploma year 111Auditing and investigation- 6 th Semester a) Question no. two. Total marks =20   Money laundering, at its simplest, is the act of making money thatcomes from Source A look like it comes from Source B. In practice, criminals are trying to disguise the origins of moneyobtained through illegal activities so it looks like it was obtainedfrom legal sources. Otherwise, they can't use the money because itwould connect them to the criminal activity, and law-enforcementofficials would seize it. It is the process of making dirty money toappear good one.The most common types of criminals who need to launder moneyare drug traffickers, embezzlers, corrupt politicians and publicofficials, mobsters, terrorists and con artists ( 5 marks) Student isexpected todemonstratethat, h/she hasa Knowledgeon moneylaundering b) Stages/process of money laundering i. Placement  -At this stage, the launderer inserts the dirtymoney into a legitimate financial institution. This is often inthe form of cash bank deposits. This is the riskiest stage of the laundering process because large amounts of cash are pretty conspicuous, and banks are required to report high-value transactions.ii. Layering - Layering involves sending the money throughvarious financial transactions to change its form and make itdifficult to follow. Layering may consist of several bank-to- bank transfers, wire transfers between different accounts indifferent names in different countries, making deposits andwithdrawals to continually vary the amount of money in theaccounts, changing the money's currency, and purchasinghigh-value items (boats, houses, cars, diamond) to changethe form of the money. This is the most complex step in anylaundering scheme, and it's all about making the srcinaldirty money as hard to trace as possible.iii. Integration - At the integration stage, the money re-entersthe mainstream economy in legitimate-looking form -- itappears to come from a legal transaction. This may involvea final bank transfer into the account of a local business inwhich the launderer is investing in exchange for a cut of the profits, the sale of a yacht bought during the layeringstage. At this point, the criminal can use the money withoutgetting caught. It's very difficult to catch a launderer duringthe integration stage if there is no documentation during the previous stages.Full marks for discussion of these three process of moneylaunderingc) Symptoms of money laundering Full mark for 2Zanzibar Institute of Financial Administration -Chwaka  Marking Scheme for Advanced diploma year 111Auditing and investigation- 6 th Semester 1.Secretive client: the client who is reluctant to providedetails of his identity and back ground.2.Untypical instruction: the client who has obviousreasons for using particular company.3.Lack of economic purposes; the client’s transactionlacks or includes steps which lack any obviouseconomic purposes.4.Nominees and trusts behind the fund management,transfer, deposition etc5.Holding client asset without convincing reasons6.Suspect terrorist i.e country where drug production or trafficking may be prevalent (5marks) any five four  points each at1.25 mark d) Effects of money laundering. 1.Social effects2.Economic effects3.Taxation effects4.Security effects (5marks) Student isexpected todiscuss theseeffects veryshortly a) iii Question no. three, total marks=20 Economy may be defined as “minimizing the cost of resources usedfor an activity having regard to the appropriate quality”. Economyrelates to all types of resources such as physical, financial, humanand information. The question of economy is relevant to theacquisition of resources. Auditors try to determine whether theresources have been acquired in the right amount, at the right place,and the right time, of right kind and at the right cost.This by itself is not very easy. It presumes that there are standardsavailable to judge whether considerations of economy were kept inview in acquiring resources. One example of a standard for economy is to accept the lowest open bid for buying an asset.  (6 marks) Indicator of Economy :1.Decisions are made with cost consciousness.2.Poor quality output due to low quality input.3.Suspension/delay in implementation of decisions due to risein market process.4.Nonpayment/Settlement of certain obligations e.g. staff overtime without justifiable reasons.5.Existence of savings not matching with the level of  performance.6.General, management becomes too conservative in makingdecisions due to financial implications of those decisions.  (4 marks) 3Zanzibar Institute of Financial Administration -Chwaka  Marking Scheme for Advanced diploma year 111Auditing and investigation- 6 th Semester  b)Usefulness of the concept in public sector audit.1.The public sector in Tanzania is generally malfunctioningdue to mismanagement, misuse, and underutilization of resources both financial, non-financial and humanresources.2.The government budget is characterized of persistentdeficits due to excessive expenditures of the votes andinstitutional budgets3.Public officers are overstaffed due to uncontrolledrecruitment.4.Fraud and embezzlement are rampant in the public sector coffers due to lack of accountability5.Public buildings and other tools eg. Vehicles are dilapidatesand become excessively obsolete due to lack of maintenance, care, and misuse.6.Government stores are heavily misused or stolen due to lack of effective controls.7.Some individuals are becoming millionaires in the publicsystem due to rampant irregularities in the use of publicmoneys and other resources and also due to irregular schemes of awarding tenders and opportunities.8.Abuse of power, misuse of authority, override of regulatoryschemes and disregard of the lawJust pointsmentioning.2 marks for every pointmentioneda) Question no. four 1.Self-interest;2.Self-review;3.Advocacy;4.Familiarity; and5.Intimidation. .1. Examples of circumstances that may create  self-interest   threats include, but are not limited to: ã A financial interest in a client or jointly holding a financialinterest with a client. ã Undue dependence on total fees from a client. ã Having a close business relationship with a client. ã Concern about the possibility of losing a client. ã Potential employment with a client. ã Contingent fees relating to an assurance engagement. ã A loan to or from an assurance client or any of its directorsor officers.Two marksfor each point.One for mentioningand other for givingexamples4Zanzibar Institute of Financial Administration -Chwaka
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