QUESTION 1 (25 marks) The International Standard on Auditing (ISA) 700 (Forming an opinion and reporting on financial statement states that an auditor should form an opinion on the financial statement based on the evaluation of the conclusion drawn from the audit evidence. You are required to: 1.1 Consider whether the following statements are true or false, and if false, motivate your answer: a) All material events occurring 12 months after the reporting date have been appropriately dealt with. b) All qualitative aspects of the entity's accounting practices, including indicators of possible bias in management judgement have been considered. c) All misstatements (including clearly trivial misstatements) which have been identified during the audit result in a material misstatement of financial information. d) Sufficient appropriate audit evidence has been obtained. e) The terminology used in the financial statements is appropriate. (7) Explain the three different types of modifications to an audit opinion. (6) 1.3 Explain the term 'scope limitation' and 'pervasive' in the context of modification to audit opinions. (4) 1.4 Explain the term 'key audit matters'. (3) 1.5 A final materiality figure of R50 000 has been set for ABC Ltd. Management of ABC Ltd has recorded an allowance for credit losses of R65 000 below the amount recorded in the prior year, although the trade and other receivable account has increased from the prior year. The auditor believes that the allowance for credit losses should in fact be R15 000 more than the prior year. 1.2 a) What is the amount by which the allowance for credit losses is misstated? b) State what type of misstatement the above will be an example of. c) Explain if the misstatement in the allowance for credit losses is material. d) Provide the correcting journal entry for the allowance for credit losses. (5)

QUESTION 1 (25 marks) The International Standard on Auditing (ISA) 700 (Forming an opinion and reporting on financial statemen states that an auditor should form an opinion on the financial statement based on the evaluation of th conclusion drawn from the audit evidence. You are required to: 1.1 Consider whether the following statements are true or false, and if false, motivate your answer: a) All material events occurring 12 months after the reporting date have been appropriately dealt with. b) All qualitative aspects of the entity's accounting practices, including indicators of possible bias in management judgement have been considered. c) All misstatements (including clearly trivial misstatements) which have been identified during the audit result in a material misstatement of financial information. d) Sufficient appropriate audit evidence has been obtained. e) The terminology used in the financial statements is appropriate. 1.2 Explain the three different types of modifications to an audit opinion. 1.3 Explain the term 'scope limitation' and 'pervasive' in the context of modification to audit opinions. (4) 1.4 Explain the term 'key audit matters'. 1.5 A final materiality figure of R50 000 has been set for ABC Ltd. Management of ABC Ltd has recorded an allowance for credit losses of R65000 below the amount recorded in the prior year, although the trade and other receivable account has increased from the prior year. The auditor believes that the allowance for credit losses should in fact be R15 000 more than the prior year. a) What is the amount by which the aliowance for credit losses is misstated? b) State what type of misstatement the above will be an example of. c) Explain if the misstatement in the allowance for credit losses is material. d) Provide the correcting journal entry for the allowance for credit losses