Please answer all of the questions below. This is all the information that are given. Thank you.

Question 3 10 Marks (a) The total value for the trade receivables account is $1,500,000 consisting of 650 items. The auditor randomly selected 75 items for testing. The dollar value of the sample of trade receivables selected for testing is $260,000. Assume the auditor discovered errors totalling $20,600 when conducting the substantive testing of the sample. Extrapolate the errors to the population and calculate the total projected error. Show all workings. (2 marks) (b) Assuming that the projected error calculated in (a) above exceeds the tolerable error set for materiality, list three courses of action the auditor has available. (3 marks) I (c) For each of the procedures (listed below) included in your rm's audit program, identify whether the procedure is a test of controls (T 0C) or substantive procedures (SP). (5 marks) Audit procedures TOC I SP Select transactions from accounts payable listing and agree to suppliers' invoices. ii. Select transactions from payroll listing and agree to time sheets. iii. Observe mailing of monthly statements. Scan repairs and maintenance for items that were expensed rather than capitalised. Observe that cash handling is independent of accounting (recording functions). Inspect evidence of client's reconciliations of shipments to invoices. Test clerical accuracy of listing of non-current liabilities. ' ' . Attend the annual stock-take of inventory and ensure that all " Iprooedtlres are complied with. aspect documents for evidence of- authorisation. Question 3 10 Marks The total value of accounts payables is $1,200,000 consisting of 850 items. The auditor randomly selected 65 items for testing. The dollar value of the sample of accounts payables selected for testing is $180,000. Assume the auditor discovered errors totalling $17,600 when conducting the substantive testing of the sample. Required: Extrapolate the errors to the population and calculate the total projected error. Show all workings. (2 marks) (b) What would the auditor conclude if the projected error calculated in (a) above fell below the tolerable error set for materiality? (2 marks) Question 3 continued over next page(c) Required: (i) What are substantive audit procedures? (2 marks) (ii) If both control risk and inherent risk is determined to be low, what impact would this have on detection risk and what impact would this have on the auditors overall audit strategy? (2 + 2 marks)