I) International Standard in Auditing 315 (revised 2019) Identifying and assessing the risks of material misstatement requires that Auditors obtain a sufficient understanding of an entity's internal control. Give two main reasons that the auditors have in mind when conducting an evaluation of an entity's internal controls? (4 marks)

II) Located in Lusaka, Groutex Company Ltd was established in 2010 and became a full service construction company that offers, Structural engineering project management, design and build works with a strong personal commitment on each project. As an audit assistant, you are part of the audit team of Groutex Construction, you are assigned to review and test the payroll transactions. Groutex Construction is a privately owned company, which has about 30 full-time employees, and another 30 to 60 part-time employees, depending on the companys needs. All employees, Job foreman, and other workers are paid hourly wages. Your procedures show the payroll register was properly signed, totalled, and posted. The company keeps a separate bank account for payroll transactions, which normally carries a balance between K20, 000 and K100, 000. Based on your conversations with the owner of the company and the Accountant, you determine the following:

Any new employee is interviewed by and hired by the owner of the company. Upon being hired, the new employee must complete appropriate employment contract and other NAPSA and tax related forms. This information is given to the Accountant.

At the end of every day, the job foreman phones the owner to report the number of hours worked by each employee on the job. The owner then reports this information to the Accountant.

Each Friday at the end of the day, the accountant prepares payroll based on the number of hours reported by the owner for each employee, the employees wage rate, and Napsa and PAYE deductions. Accountant then prepares payroll cheques.

. At the end of the day on Friday, the owner quickly scans through the cheques and signs them. On Monday morning, the owner has a meeting with all job foremen. Payroll cheques are given to each job foreman who then distributes the checks to employees every Monday.

At the end of the month, the accountant performs monthly bank reconciliation on the payroll bank account, and writes and posts any needed adjusting journal entries. Required

a.) Identify any significant deficiencies or material weaknesses in the payroll procedures used in the Payroll system for Groutex and write a management letter.(11 marks)

b)Advice on the audit strategy that your team will employ for the payroll (2 marks)

c)For each deficiency, explain the substantive tests that your audit team should carryout and state which financial statement assertion the substantive tests will aim to confirm.

You may present you answer in the tabular format below(8 marks)

Deficiency substantive tests assertion