Question 1 (a) What are the objectives of a financial statement audit? 6 Marks (3 Marks) (b) Explain three main limitations of a financial statement audit. (3 Marks) 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 firm's audit program, identify whether the procedure is a test of controls (TOC) or substantive procedures (SP) (5 marks) Audit procedures ToC/ SP Select transactions from accounts payable listing and agree to i. 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 iv. than capitalised. Observe that cash handling is independent of accounting v. (recording functions). vi. Inspect evidence of client's reconciliations of shipments to invoices. vii. Test clerical accuracy of listing of non-current liabilities. viii. Attend the annual stock-take of inventory and ensure that all procedures are complied with. ix. Inspect documents for evidence of authorisation. X. Inspect title deeds to verify that property is owned by the client