Question Tag: Audit Process

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  • 3 Marks

AA – Dec 2022 – L2 – Q5c – Audit and Assurance Evidence

Explains three assertions relevant to the audit of tangible non-current assets.

You were recently appointed by Danso & Co Chartered Accountants. You were part of the team that audited a construction company with a huge asset base. Your Manager reviewed your file and raised questions that audit evidence obtained was not relevant since it did not address any assertions of property, plant, and equipment. ISA 500: Audit Evidence requires that audit evidence must be sufficient, relevant, and reliable.

Required:
Explain THREE (3) assertions relevant to the audit of tangible non-current assets

Assertions relevant to the audit of tangible non-current assets:

  • Completeness: Ensuring that all non-current assets are recorded in the financial statements.
  • Existence: Verifying that the assets physically exist and are in the company’s possession.
  • Valuation: Checking that the assets are correctly valued, including the accuracy of depreciation calculations.
    (3 marks)
  • 4 Marks

AA – Dec 2022 – L2 – Q5a – Regulatory Framework and Audit Responsibilities

Outlines four rights that auditors have to effectively carry out their duties.

Auditors have various duties to perform in their role as auditors, for example, to express an opinion regarding the truth and fairness of the financial statements.

Required:
State FOUR (4) rights that enable auditors to carry out their duties.

Rights that enable auditors to carry out their duties:

  • Right of access to the company’s books and records at any reasonable time to collect the evidence necessary for the audit.
  • Right to require information and explanations from the company’s officers as deemed necessary to perform the audit.
  • Right to receive notice of and attend any general meetings of the company.
  • Right to speak at general meetings on any matters affecting the auditor or previous auditors.
    (4 marks)
  • 5 Marks

AA – Dec 2022 – L2 – Q3a – Audit and Assurance Evidence

Outlines five general principles from ISA 500 for assessing the reliability of audit evidence provided by a client

You have been asked by your Audit Manager to assess the audit evidence provided by a client, a small company owned by Mr. and Mrs. Randolph-Phillips. You observed that the files have been neatly packaged and well referenced. You are however skeptical as to the quality of evidence provided because the year’s audit encountered many difficulties.

Required:
Outline FIVE (5) general principles in accordance with ISA 500: Audit Evidence, that will assist you in assessing the reliability of the audit evidence received.

General principles for assessing reliability of audit evidence:

  • Audit evidence is more reliable when it is obtained from independent sources outside the entity under audit.
  • Internally generated audit evidence is more reliable when the internal controls are effective.
  • Audit evidence obtained directly by the auditor is more reliable than audit evidence obtained indirectly or by inference.
  • Audit evidence is more reliable if it exists in documentary form.
  • Audit evidence provided by original documents is more reliable than evidence provided by photocopies or electronically transformed documents.

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