i) As a recent University graduate from Mulungushi University, you have joined Grand Thornton as a new audit trainee staff member together with your friend Jack .You are having lunch with Mr Bwalya, an audit senior. The three of you are working on the audit engagement of a retailer that has operations in Lusaka, Central and Copperbelt province. Your friend Jack has a question and he asks: In my reading I have seen a number of examples of audit data analytics. However, I am having a difficult time distinguishing between audit data analytics as a risk assessment procedure and audit data analytics as a substantive test. Can you explain the difference to me and illustrate with a practical example? Required Answer Jacks questions by:

a) Explaining with a practical example what audit data analytics (ADA) is and give one reason when ADA may not be used (4 marks)

b) Explaining the difference between audit data analytics as a risk assessment procedure and audit data analytics as a substantive test. Your explanation should include a practical example. (7 marks)

ii)Game stores Zambia is a departmental store that stocks and sales a variety of home electronics and appliances ranging from refrigerators, stoves, washers , dryers, televisions, computers, and cell phones. As an audit assistant, you have been assigned to audit inventory for Game stores together with James the audit senior. Game stores has 7 Warehouse locations located in in provincial headquarters in Zambia.

Required

James and You are setting up a plan to audit the existence of inventory for game. Put the following steps associated with planning and executing a sample of inventory in the proper order.( 5 marks)

1. Choose the number of items to be examined.

2. Document conclusions.

3. Select a representative sample.

4. Determine the objectives of the substantive test.

5. Determine the type of sampling to be used.

6. Determine the substantive procedures that will meet objectives.

7. Determine sample size.

8. Apply audit procedures.

9. Define the population and sampling unit.

10. Evaluate results of the sample.

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iii)After doing or the preliminary steps in the inventory of Game, James and You are now Evaluating a Probability-Proportionate-to-Size (PPS) sample. Assume the following misstatements were found in a PPS sample: Sample Item Book Value Audit Value 1 K 650 K585 2 540 0 3 1,900 0 4 2,200 1,650 5 2,800 2,660 If a risk of incorrect acceptance of 10% is specified in the sample design, the sampling interval is K1,700, and five misstatements are found as enumerated above, Required: Calculate the

a. The Projected misstatement (5 marks)

b). The Basic precision.(3 marks)

c). The incremental allowance for sampling risk.(5 marks)

d). The upper misstatement limit.(3 marks)

e). If tolerable misstatement were K7, 000 and expected misstatement were K5, 000, what conclusion would you reach based on your results in (a -d) above? (4 marks)