Consider the following statements. State, giving reasons, whether each of the statements below (1-13) is true or false. 1. Audit reports on the annual financial statements of listed companies are addressed to the shareholders or to the audit committee, while audit reports for private companies are addressed to the directors. 2. The auditor may give an unmodified audit opinion where a modified audit opinion is required if, with the consent of the directors, he (the auditor) addresses the matter which gave rise to the need to modify the audit opinion at the annual general meeting. This applies only to private companies. 3. Where the only unresolved audit matter relates to inadequate disclosure, albeit material inadequate disclosure, the auditor can avoid a qualification by giving an 'emphasis of matter'. 4. An unresolved audit difference (misstatement), which is based on a disagreement with management and those charged with governance, and which renders the financial statements fundamentally misleading, must result in an adverse opinion. 5. An 'except for' qualification (modification of the audit opinion) can be given for a matter arising out of either a scope limitation or a disagreement with the management/ directors. 2|Page

6. To avoid a qualification (modification of the audit opinion) of the audit report, the auditor can adjust the financial statements if the directors refuse to do so, provided the shareholders agree. If this occurs, an 'Other matter' paragraph must be added to the audit report. 7. The auditor has no responsibilities in respect of information contained in an annual report other than the information he must report on in terms of the Companies Act. 8. The audit report should not be signed prior to the date the directors sign the financial statements (the directors must sign first). 9. If the auditor ends up with two unresolved audit differences, both of which are material and pervasive, but one is based on a limitation of scope (inability to obtain sufficient appropriate evidence), and the other is based on a disagreement (misstatement), the auditor should give an adverse opinion and not a disclaimer of opinion. 10. Key audit matters must be communicated to shareholders for all companies with public interest scores of more than 350. 11. When conducting an independent review engagement on a set of annual financial statements, a registered auditor is not required to comply with the International Standards on Auditing. 12. When conducting an independent audit, the auditor is required to formulate a strategy for the audit, but for an independent review, a strategy for the review is not specifically required. 13. An audit report gives rise to an audit opinion and a review engagement gives rise to a review opinion.