Internal control being one of the major determinants of an organizations success requires the attention of every individual in an organization. A good internal control system will provide organizations with a high degree of confidence that their operations are efficiently managed. There are advantages and disadvantages/limitations to be gained from effectively designed and implemented internal control. You are required to discuss FIVE (5) advantages and FIVE (5) disadvantages/limitations of internal controls.

QUESTION 2 (20 Marks)

Audit sampling is the use of an audit procedure on a selection of the items within an account balance or class of transactions. The sampling method used should yield an equal probability that each unit in the sample could be selected. The intent behind doing so is to evaluate some aspect of the information. Audit sampling is needed when population sizes are large, since examining the entire population would be highly inefficient. You are required to discuss the steps that are followed when selecting an audit sample.

QUESTION 3 (20 Marks)

The preliminary stage consists of what is termed the engagement activity. It is the stage where the auditor decides to accept or not accept an audit engagement. Hence, it takes place before an audit engagement is accepted. Some of the activities of an auditor at this stage are inclusive of establishing an understanding of the terms of the engagement, checking for their clients compliance with ethical requirements relating to the engagement, checking for their clients integrity, determine whether the client can be appropriately serviced and performing procedures to determine whether the client or the audit firm wishes to establish or continue the audit relationship. You are required to discuss the steps, which are involved in the preliminary stage of the audit process.