During the audit team planning meeting, a member of the auditteam passed a comment that based on past experience with theclient, he was confident that the management of the client washonest and there was no issue as regards management integrityor risk of fraud in the Company. The audit manager respondedthat the auditor should always maintain an attitude ofprofessional skepticism throughout the audit.

Required

a)Briefly describe 'Audit Skepticism' and elaborate on theresponse of the audit manager.

b)Discuss auditor's duties as regards evaluation of audit evidence

c)Net profit of Reed Ltd. for year ended December 31, 201 7, after chargingremuneration of CEO ksh.5.2 million amounted to ksh990 million youhave noted that the director has charged personal traveling expensesamounting to ksh 0.8 million to business expense. What will be the impact on audit report?

d)Slashing Co manufactures women's clothing and its year end was 31 July 2015. You are an audit supervisor of Jaunty & Co and the year-end audit for slashing Co is due to commence shortly. The draft financial statements recognize profit before tax of ksh26m and total assets of ksh18m. You have been given responsibility for auditing receivables, which is a material balance, and as part of the audit approach, a positive receivables circularization is to be undertaken. At the planning meeting, the finance director of slashing Co informed the audit engagement partner that the company was closing one of its smaller production sites and as a result, a number of employees would be made redundant. A redundancy provision of Ksh 110,000 is included in the draft financial statements.

Required:

1)Describe the steps the auditor should perform in undertaking a positive receivables circularization for slashing.

2)Describe substantive procedures, other than a receivables circularization, the auditor should perform to verify each of the following assertions in relation to slashing Company's receivables:

i.Accuracy, valuation and allocation;

ii.Completeness; and

Rights and obligations.