2. One of the challenges faced by the audit team auditing Bwefa Ltd is lack of confirmation of accounts receivable balances from the customers. However, Maria Wend, the lead auditor decided that such is not a significant issue because confirmation of customers accounts receivable rarely provides reliable evidence about the completeness assertion. What is the reason for Maria reaching this decision?

a.

Customers may not be inclined to report understatement errors in their accounts

b.

Recipients usually respond only if they disagree with the information on the request

c.

Auditors typically select many accounts with small balances to be confirmed

d.

Many customers merely sign and return the confirmation without verifying its details

3. In an audit of financial statements, the auditor is required to assess the controls operating within the entity that are also relevant to the audit. This is primarily done for the following reason:

a.

To identify the areas where each audit team member will focus on during the audit

b.

To better assess the risks of material misstatement which will affect audit procedures

c.

To determine the extent on which the work of the internal auditor can be relied on.

d.

To help plan the tests to be undertaken during the audit

4.

Zu Ting, a senior auditor working for XYZ Accountants was chosen to lead the audit of Dietanic Ltd. Because Dietanics accounting and control systems extensively use IT, Zu has a choice of three strategies that can be used to perform tests of controls for Dietanic. Which of the following is not one of those strategies?

a.

Planning for a low control risk assessment based on application controls

b.

Assessing control risk based on user controls

c.

Planning for a high control risk assessment based on general controls and manual follow-up

d.

Planning for a low control risk assessment based on user controls and manual follow-up