Auditing Fundamentals In A South African Context 2nd Edition Gerrit Penning, Rika Butler, Pieter Von Wielligh, Frans Prinsloo - Solutions

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Describe the conditions that have to be met in order to qualify as an independent professional accountant. (LO 4)
Which of the following statements pertaining to Reportable Irregularities identified during an independent review are false? (More than one answer is possible.) (LO 5)a) Practitioners have to report to the CIPC and not to the IRBA.
Which one of the following persons may not perform an independent review for an entity that has a public interest score of 150? (LO 3)a) A member of SAICAb) A member of SAIPAc) A Registered Auditord) None of the above - they can all perform the review
One of the main differences between performing review and audit engagements is that review engagements normally consist only of enquiry and analytical procedures, whereas audit engagements consist of other procedures too. (LO 7)
When assessing risk of material misstatement in a review engagement, the practitioner does not have to differentiate between risk at financial statement level and risk at account balance/class of transactions/disclosure level. (LO 7)
Independent reviews and audits are both conducted in accordance with the requirements set out in the ISAs. (LO 6)
Any company can always voluntarily elect to have an independent review instead of an audit performed on its financial statements. (LO 2)
A limited assurance engagement results in a positive expression of the practitioner's conclusion in the review report. (LO 1 & 7)
Describe the primary differences and similarities between independent reviews and audits in terms of:a) Pre-engagement acceptance considerations;b) Engagement planning considerations;c) Considerations relating to the performance of the engagement;
Understand the various pronouncements that dictate the scope of an independent review.
Explain the differences between Reportable Irregularities for independent reviews and for audits.
Describe the requirements that have to be met to qualify as an independent professional accountant.
independent review. Describe which persons can perform independent reviews taking into account the public interest score of the entity.
Identify the conditions leading to an entity requiring an
Explain the differences between reasonable and limited assurance engagements.
How does one conduct an independent review?
What are the statutory and regulatory requirements surrounding an independent review?
What is an independent review?
Which one of the following does not constitute an audit procedure performed by the auditor in assessing the appropriateness of preparing the financial statements using the going concern basis of accounting? (LO 26)a) Discussion with management or those charged with governance about events or
When an entity prepares its financial statements using the going concern basis of accounting, it prepares them with an assumption that it will continue with its operation for a period of at least. months after the end of the financial reporting period. (LO 22)a) 6b) 12c) 18 d)
In terms of ISA 701, the auditor has a responsibility to communicate 'key audit matters' in the auditor's report for all entities by which the auditor is engaged to perform a statutory audit. (LO 13)
When a Reportable Irregularity exists, it will be highlighted in the Emphasis of Matter paragraph of the auditor's report. (LO 12)
Other Matter paragraphs, including the Report on Other Legal and Regulatory Requirements paragraphs, are included in the auditor's report to highlight to the users matters presented or disclosed in the financial statements. (LO 13)
Emphasis of Matter, Other Matter and Material Uncertainty Related to Going Concern paragraphs do not lead to modification of the audit opinion. (LO 13)
When the auditor has obtained sufficient appropriate audit evidence and has identified material misstatements that are also considered to be pervasive, and management refuses to correct these misstatements, the auditor will express an adverse opinion. (LO 11)
When the auditor is unable to obtain sufficient appropriate audit evidence about a matter and there are no alternative audit procedures that can be performed, and the auditor considers such matter to be material only, the auditor will disclaim his or her opinion on the financial statements. (LO 11)
When the auditor has obtained sufficient appropriate audit evidence about the financial statements and is satisfied that they are fairly presented, the auditor will express a type of a modified audit opinion. (LO 11)
Audits of South African companies are performed in accordance with the ISAs. (LO 8)
The only objective of an audit is for the auditor to express an opinion on whether the financial statements are in compliance with the International Financial Reporting Standards (IFRSS). (LO 8)
In expressing an opinion, the auditor provides absolute assurance on the financial statements of the company. (LO 8)
If final materiality is different from performance materiality, the auditor will use performance materiality in assessing the misstatements identified during the audit. (LO 3 & 5)
The auditor will only assess the going concern ability of the entity if management or those charged with governance requests the auditor to do so. (LO 23)
Factual insolvency exists when an entity is not able to pay its debts in the normal course of business. (LO 27)
If the intention of placing the company in business rescue proceedings is only to award a better return to the shareholders and creditors and not to rehabilitate the company to be a going concern, the auditor will express an unmodified audit opinion with an Emphasis of Matter paragraph if the
Once a company is placed in business rescue proceedings, it will be an indication to the auditor that the financial statements should be prepared on the liquidation basis. (LO 32)
Business rescue proceedings are undertaken exclusively to rehabilitate the company to be able to continue as a going concern. (LO 30 & 31)
Obtaining an attorney's confirmation letter providing information about litigation against the entity is one of the types of audit procedures the auditor will perform in identifying subsequent events. (LO 21)
(LO 19 & 20)
The auditor has an obligation to obtain sufficient appropriate audit evidence with regard to subsequent events to ensure that they are properly accounted for by management in terms of IAS
Adjusting subsequent events require only disclosure in the form of a note to the financial statements. (LO 18)
Subsequent events are defined as events occurring between the date of the financial statements and the date of the auditor's report. (LO 17)
Consider the impact on the auditor's report of a company in business rescue proceedings.
Formulate the procedures the auditor will perform when a company is placed under business rescue proceedings.
Explain the purpose of business rescue.
Define the term 'business rescue!
Explain the impact of going concern uncertainties on the auditor's report and apply to basic cases.
Explain the purpose of a subordination agreement and its impact on the auditor's assessment of the appropriateness of the going concern basis of accounting.
Distinguish the categories of insolvency and explain the significance of each to the audit.
Describe the audit procedures to respond to the risk of the inappropriate use of the going concern basis of accounting.
Evaluate the appropriateness of the use of the going concern basis of accounting for a given set of facts (including risks and mitigating factors).
Identify indicators of the going concern risk and also the mitigating factors.
Contrast the responsibilities of management and the auditor regarding the going concern basis of accounting used in preparing the financial statements.
Explain the going concern basis of accounting used in the preparation of financial statements.
Formulate the audit procedures the auditor will perform with regard to subsequent events.
Explain the auditor's responsibilities with regard to subsequent events.
Explain management's responsibilities with regard to subsequent events.
Distinguish between adjusting and non-adjusting subsequent events.
Define 'subsequent events!
Draft the various types of modification, material uncertainty related to going concern, emphasis of matter and other matter sections in the auditor's report for a given scenario.
Explain the impact of the different types of modifications, material uncertainty related to going concern, emphasis of matter and other matters on the auditor's report.
Explain how going concern uncertainties, Reportable Irregularities and contraventions of the Companies Act can affect the audit opinion and report and their impact on the audit opinion and report.
Understand which entities' auditor reports require KAMS to be included.
Define 'key audit matters' (KAMs).
Distinguish between the types of audit opinions and reports.
Draft an unmodified auditor's report.
Describe the structure and content of the auditor's report.
Explain the link between the objective of an audit and the auditor's report.
Explain the impact of uncorrected misstatements on the auditor's report.
Describe management's and the auditor's responsibilities with regard to misstatements in the financial statements.
Use final materiality to evaluate uncorrected misstatements individually and in aggregate.
Prepare a schedule of unadjusted audit differences for misstatements identified during the audit.
Calculate final materiality and explain the impact on the audit if it differs from the materiality figure used in planning and performing the audit.
Distinguish between the categories of misstatements.
Provide a brief explanation of how CAATS can be used during the gathering of audit evidence phase of an audit where a substantive audit approach is followed. (LO 12)
Describe two benefits to an auditor of using CAATS on an audit where it is both possible and preferable to use CAATS. (LO 11)
Provide a brief description of the following CAAT tools available to an auditor: (LO 10)a) Data analytics softwareb) Utility softwarec) Software for flowcharting
Briefly explain the purpose of CAATS. (LO 6)
CAATS can be used to gather audit evidence directly. (LO 9)
The more computerised an audit client's information system is, the more likely the auditor will perform CAATS on the engagement. (LO 11)
The use of an integrated test facility as part of the performance of CAATS is ideal in situations where extensive data analysis of the client's financial data is required. (LO 12)
Assuming than an audit team has acquired the services of an information systems auditor, the scope of any CAATS performed on the audit engagement is limited only to what the information systems auditor deems necessary to perform for the audit team. (LO 6)
The use of data-oriented CAATs will be essential in an audit engagement where the audit client's computer system is old and data cannot be extracted from the client's system for loading onto the auditor's computer. (LO 11)
Select the CAAT(s) best performed where an auditor is required to test the automated input controls of an audit client's accounting software package: (LO 12)a) Test datab) Integrated test facilityc) Parallel simulation
Which of the following constitute CAATs performed by the auditor? (More than one answer is possible.) (LO 6)a) Using audit file software to prepare work papersb) Inspecting internal sales orders printed out from the client's computer system for evidence of approvalc) Recalculating a column of data
When using test data to test the automated controls of a client's computer system, an auditor would use the following computer-assisted audit techniques (CAATS) approach(es) to do so: (LO 8)a) Around the computerb) Through the computerc) With the computerd) All of the abovee) None of the above
Describe the matters that the external auditor should evaluate to determine whether the auditee's internal audit function is likely to provide evidence relevant to the external audit. (LO 5)
Explain why the accuracy, valuation and allocation assertion relating to an account balance containing an accounting estimate is often assessed as being at significant risk of material misstatement. (LO 2)
Explain how the auditor can obtain evidence about the completeness of inventory by performing test counts. (LO 1)
Describe the audit procedures the auditor should perform in relation to a wage payout, after he or she has observed the actual physical payout. (LO 1)
How should the auditor deal with a situation where the auditee's management refuses to provide the auditor with a signed written representation letter? (LO 4)
If inventory is held at multiple locations, explain how the auditor would determine whether or not attendance at these other locations is necessary. (LO 1)
Explain why the analysis of differences is important in the accounts receivable confirmation process, even if the misstatement(s) in the sample are not considered material. (LO 4)
Identify and explain the two types of external confirmations that are available to the auditor. (LO 4)
The use of other parties in an audit slightly reduces the auditor's responsibility for issuing of the audit opinion. (LO 5)
Internal auditors need not be concerned about the validity and accuracy of entity records if the entity has independent external auditors since they will make the necessary verification. (LO 5)
Analysis of the legal fees expense account of the entity is an essential procedure that should be performed on every audit. (LO 4)
Debtors confirmations must be performed for every audit. (LO 4)
When auditing a bank or creditors reconciliation, among others, the significant reconciling items must be audited to establish that their inclusion in the reconciliation (a) is appropriate, and (b) that they are reflected in the correct amount. (LO 3)
Auditors should ordinarily send confirmation requests to all banks with which the client has conducted any business during the financial year, regardless of the materiality of the year-end balance. (LO 2)
In order to detect the rolling of deposits, it is important to prepare and analyse interbank transfers. (LO 2)

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Auditing Fundamentals In A South African Context 2nd Edition Gerrit Penning, Rika Butler, Pieter Von Wielligh, Frans Prinsloo - Solutions

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