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

Question 1 6 Marks (a) Explain the 'audit expectation gap'. (3 marks) (b) Briefly discuss three issues that could cause an 'audit expectation gap'. (3 marks)Question 7 continued (b) Explain the difference between the two types of subsequent events. Give an example of each and explain the type of adjustment (if any) that would be required to the financial report for each type of event. (6 marks)Question 7 10 Marks (a) For each of the following situations, state the type of audit opinion which should be given. (4 marks) Choc Limited is a large company that your firm has audited for the last ve years. The directors refuse to include a cash ow statement in the financial report, stating that it is far too time consuming to obtain the necessary information, and that they do not believe a cash ow statement is necessary for a true and fair view. The effect of the non-disclosure is likely to render the nancial report meaningless. ii You have received the draft annual report from Stanza Limited. 0n reading the "Year in Review' you note the chairman states that revenues increased by 150%. On checking the accuracy of this information you note that revenues have actually fallen by 10%. Stanza Limited refuses to change anything in the annual report for fear of missing printing deadlines. iii The management of Rushing Enterprises Ltd has calculated its Provision for Doubtful Debts at $450,000. The company has indicated that bad debts written off in July should not be considered in the provision. as the nancial failure of the debtor companies did not occur until after the balance date. Your audit manager has reviewed the aging and potentiai coliectability of debtors and she believes that the provision shikilci be closer to $620,000. Management's reSponse to the audit manager's estimation is that they have a better understanding of their customer's and disagree with the inclusion of bad debt write offs in the provision and are. therefore, unwilling to alter the provision. Reported profit before tax is $750,000. iv The client refuses to include all preperty plant and equipment in the balance sheet and the auditor believes that the effect of this action is material and pervasive on the nancial reports Question 7' continued over next page