"It is extremely important that the behaviour and conduct of our auditing companies continue to justify the respect, trust and confidence that they have earned," said Jongisa Magagula, the company's investor relations' spokesman. The mining company has terminated all the services provided by KPMG. The move could see the opening up of a new front in the battle being fought by KPMG to hold on to its clients. Source: BUSINESS DAY, 23 OCTOBER 2017 - 13:13 ANN CROTTY An auditor's objective is to be in a position where he/she can form an opinion on whether reports or statements from an audit presents in all respect the position of the organization at a particular point in time. After accepting an audit offer, auditors need to obtain the necessary evidence to form and support his/her evidence. In order to form and support evidence, the auditor goes through an audit process. This audit process is a logical process or task that forms the audit activities and they do so in a sequential manner. It is also a process that is planned and implemented according to audit standards. 3.1 Discuss the following steps in the preliminary stage of the audit process: 3.1.1 Prospective client 3.1.2 Establishing an understanding with the client 3.1.3 Client acceptance or continuance (5 marks) (5 marks) (5 marks) (5 marks) (20 Marks) QUESTION 4 Most organisations have different requirements for information in their business. Therefore the usage for information by organisations differs. The difference in the need for information has contributed to the different types of information systems that exist within organisations. In reference to the above, comprehensively analyse and discuss the major types of information systems. African Rainbow Minerals opts to cut KPMG The move was spurred by concern over KPMG's governance and ethics compliance as well as allegations regarding the lawfulness of its conduct The KPMG outlook became even bleaker on Monday as African Rainbow Minerals (ARM) announced it was terminating its services as an internal auditor. The move by ARM is potentially more damaging than those of other firms that terminated KPMG's services as an external auditor. "An intemal auditor is much more embedded in a company's operations than an external auditor. They usually have offices on site," said one corporate accountant. Internal auditors are expected to pick up fraud and check on the security of a company's financial and accounting systems. ARM's most recent annual report states that KPMG performs a number of reviews to assess the adequacy and effectiveness of systems of internal control and risk management. KPMG is ARM's internal auditor since 2004, also plays a critical role in overseeing the company's risk management strategy and provides the board with independent assurance. In addition, KPMG is involved in auditing the incentives in ARM's short-and long-term executive remuneration awards. ARM's external auditor is EY, while PwC advises the firm's remuneration committee. On Monday, ARM issued a statement saying it had noted with concern the questions raised about KPMG's governance and ethics compliance as well as allegations regarding the lawfulness of KPMG's conduct. "The ethics, governance and quality of the South African auditing firms have been globally respected for many years. A trainee accountant was using a statistical sampling plan to determine whether the internal controls over the authorisation of journal entries were operating throughout the year. The client is a large national retailer of consumables and there are thousands of journal entries passed during the year. A hard copy, numerically sequenced journal entry authority (JEA) is compiled which details the journal entry and which must be authorised by one of three accountants in the accounting department before being processed on the system. As journal entries come from a number of sources there are numerous number sequences. The trainee used the audit software to temporary re-sequence the JEAs into one sequence so that a random sample could be drawn. Having done this, he performed the sampling exercise and concluded that the number of unauthorised journal entries was well within the tolerable rate of deviation. Subsequently, another trainee working on bad debt write offs found a number of unauthorized journal entries. On further investigation it was established that the trainee who had conducted the statistical sample had not confirmed that all the sequences of JEAs had been included in the temporary re-sequencing of JEAs. 2.1. Explain whether the above is an example of sampling risk or non-sampling risk. (4 marks) 2.2. Discuss whether the trainee's conclusion can still be accepted on the basis that his sample results were "well within" the tolerable deviation rate. (6 marks) 2.3. Provide the advantages and disadvantages of statistical sampling. (10 marks) 1.1. One of the components of internal control is risk assessment and from the above article, KPMG is ARM's internal auditor since 2004, plays a critical role in overseeing the company's risk management strategy. Discuss risk assessment as a component of an internal audit. (10 marks) 1.2. Describe the main objectives of internal auditing and the reasons thereof for termination of KPMG based on these objectives. (20 marks) 1.3. Differentiate the disadvantages of the following: 1.3.1 Internal Audit (5 marks) 1.3.2 Internal Control (5 marks) "It is extremely important that the behaviour and conduct of our auditing companies continue to justify the respect, trust and confidence that they have earned," said Jongisa Magagula, the company's investor relations' spokesman. The mining company has terminated all the services provided by KPMG. The move could see the opening up of a new front in the battle being fought by KPMG to hold on to its clients. Source: BUSINESS DAY, 23 OCTOBER 2017 - 13:13 ANN CROTTY An auditor's objective is to be in a position where he/she can form an opinion on whether reports or statements from an audit presents in all respect the position of the organization at a particular point in time. After accepting an audit offer, auditors need to obtain the necessary evidence to form and support his/her evidence. In order to form and support evidence, the auditor goes through an audit process. This audit process is a logical process or task that forms the audit activities and they do so in a sequential manner. It is also a process that is planned and implemented according to audit standards. 3.1 Discuss the following steps in the preliminary stage of the audit process: 3.1.1 Prospective client 3.1.2 Establishing an understanding with the client 3.1.3 Client acceptance or continuance (5 marks) (5 marks) (5 marks) (5 marks) (20 Marks) QUESTION 4 Most organisations have different requirements for information in their business. Therefore the usage for information by organisations differs. The difference in the need for information has contributed to the different types of information systems that exist within organisations. In reference to the above, comprehensively analyse and discuss the major types of information systems. African Rainbow Minerals opts to cut KPMG The move was spurred by concern over KPMG's governance and ethics compliance as well as allegations regarding the lawfulness of its conduct The KPMG outlook became even bleaker on Monday as African Rainbow Minerals (ARM) announced it was terminating its services as an internal auditor. The move by ARM is potentially more damaging than those of other firms that terminated KPMG's services as an external auditor. "An intemal auditor is much more embedded in a company's operations than an external auditor. They usually have offices on site," said one corporate accountant. Internal auditors are expected to pick up fraud and check on the security of a company's financial and accounting systems. ARM's most recent annual report states that KPMG performs a number of reviews to assess the adequacy and effectiveness of systems of internal control and risk management. KPMG is ARM's internal auditor since 2004, also plays a critical role in overseeing the company's risk management strategy and provides the board with independent assurance. In addition, KPMG is involved in auditing the incentives in ARM's short-and long-term executive remuneration awards. ARM's external auditor is EY, while PwC advises the firm's remuneration committee. On Monday, ARM issued a statement saying it had noted with concern the questions raised about KPMG's governance and ethics compliance as well as allegations regarding the lawfulness of KPMG's conduct. "The ethics, governance and quality of the South African auditing firms have been globally respected for many years. A trainee accountant was using a statistical sampling plan to determine whether the internal controls over the authorisation of journal entries were operating throughout the year. The client is a large national retailer of consumables and there are thousands of journal entries passed during the year. A hard copy, numerically sequenced journal entry authority (JEA) is compiled which details the journal entry and which must be authorised by one of three accountants in the accounting department before being processed on the system. As journal entries come from a number of sources there are numerous number sequences. The trainee used the audit software to temporary re-sequence the JEAs into one sequence so that a random sample could be drawn. Having done this, he performed the sampling exercise and concluded that the number of unauthorised journal entries was well within the tolerable rate of deviation. Subsequently, another trainee working on bad debt write offs found a number of unauthorized journal entries. On further investigation it was established that the trainee who had conducted the statistical sample had not confirmed that all the sequences of JEAs had been included in the temporary re-sequencing of JEAs. 2.1. Explain whether the above is an example of sampling risk or non-sampling risk. (4 marks) 2.2. Discuss whether the trainee's conclusion can still be accepted on the basis that his sample results were "well within" the tolerable deviation rate. (6 marks) 2.3. Provide the advantages and disadvantages of statistical sampling. (10 marks) 1.1. One of the components of internal control is risk assessment and from the above article, KPMG is ARM's internal auditor since 2004, plays a critical role in overseeing the company's risk management strategy. Discuss risk assessment as a component of an internal audit. (10 marks) 1.2. Describe the main objectives of internal auditing and the reasons thereof for termination of KPMG based on these objectives. (20 marks) 1.3. Differentiate the disadvantages of the following: 1.3.1 Internal Audit (5 marks) 1.3.2 Internal Control