QUESTION 1 (20 Marks) 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.

QUESTION 4 (20 Marks) 4.1 The evidence that is gathered by an auditor plays a crucial role in the results of the audit and the recommendations that are provided to management. When gathering evidence with regard to financial misstatements, the auditor is presented with THREE (3) various types of misstatements that could occur at financial statement and assertion level. Discuss these misstatements. (10 marks)

4.2 The evidence that is gathered by an auditor plays a crucial role in the results of the audit and the recommendations that are provided to management. There are TWO (2) attributes with regard to evidence that an auditor will need to meet before concluding the audit. What are these attributes and why are they important? (10 marks)

QUESTION 5 (20 Marks) The statements that follow are with regard to evidence that is sufficient and appropriate. As a future auditor, you are required to indicate if you agree with each statement and provide reasons for your decisions: a. When the auditor is making a decision on whether or not sufficient and appropriate evidence has been obtained they will first need to make considerations regarding the sufficiency of the evidence gathered. 2 b. An auditor can only properly measure the appropriateness and sufficiency of audit evidence that will be used when expressing opinions are by utilising statistical sampling method only when they are gathering evidence c. The level of professional scepticism that the auditor possesses is a factor that that has an influence on the appropriateness and sufficiency of audit evidence. d. The conduction of an audit in prior years for an entity will not have any influence when the auditor is determining if the evidence gathered is sufficient and appropriate for the current audit.