QUESTION 1

1. a) Explain how a company can use credit memo to cover up fictitious sales, and how auditors can detect such potential misstatements.
2. b) For accounts receivable, can the result from testing for existence assertion be used to verify valuation and allocation assertion? Explain your answer.

QUESTION 2

1. a) Your audit client during its financial year lost two key personnel, was involved in legal disputes and had substantial fall in revenue and cash flows. It is concluded that your client is not a going concern. Identify two appropriate treatments of this matter in relation to the financial report.
2. b) Differentiate an emphasis of matter and a key audit matter.