SECTION A

You must answer this question

Question 1

Jimmy Kazoos Ltd. produces and sells musical instruments to a wide range of customers              including individuals, orchestras and schools.  The chief executive officer (CEO) of the business, James Smith, has had an idea for a new type of flute that he thinks might be a good product for the company to produce in the future.

(a)        Identify and briefly explain the six transactions used at the start of the conversion cycle

to design a product template.

(12 marks)

(b)        In the transactions listed in your answer to (a) there could be a potential conflict of

interest for the company and for James.  Describe this potential conflict of interest and briefly discuss how you think it should be resolved.

(4 marks)

(c)        One of the functions of an auditor for the conversion cycle is to attend the company’s physical inventory count.  Identify six objectives that the auditor of Jimmy Kazoos Ltd. will expect to be achieved at the inventory count.

(9 marks)

(d)        Jimmy Kazoos Ltd. uses standard cost as part of the process of valuing its inventory.       What is a standard cost and why do some companies use them in their conversion cycle transactions?

(5 marks)

Total for Question 1: 30 marks

SECTION B

Answer TWO questions from this section.

Question 2

(a)        Why do behavioural problems occur in systems development?  You should discuss six

reasons why behavioural problems occur when companies try to introduce new systems or change existing systems.

(12 marks)

(b)        How can these behavioural problems be prevented? You should discuss ten ways in

which the problems identified in your answer to (a) may be prevented, explaining clearly why they address the issues you have raised in part (a).

(23 marks) Total for Question 2: 35 marks

Question 3

(a)        What is the purpose of an audit?  You should provide a definition of the term ‘audit’ and

critically discuss the three key elements of audit as identified in the course.

(13 marks)

(b)        Compare and contrast the responsibilities of directors and auditors in respect of the

audit function.  You should set out the relevant duties of directors and auditors and explain how they differ.  You should also explain why these differences exist with    reference to agency theory. Do you think that these differences are justified?

(22 marks) Total for Question 3: 35 marks