Question 1

A)ISA 315 Identifying and assessing the risks of material misstatements through understanding the entity and its environment requires the auditor to obtain an understanding of the entity and its environment including its internal control which is sufficient to assess the risks of material misstatements whether due to fraud or error and also sufficient to design and perform further audit procedures.

Required:

(i)Explain SIX (6) matters the auditor need to know in developing an understanding of the entity's objectives and strategies. (12marks)

(ii)Describe FOUR (4) factors to be considered in the risk assessment process.

(8 marks)

B)Tests of controls are performed to obtain audit evidence about the operating effectiveness of controls in preventing, detecting and correcting material misstatements. When control testing is completed, auditors make a final assessment of control risk and revise the nature, timing and extent of substantive procedures accordingly.

Required:

(i)Briefly explain SIX (6) procedures for tests of controls, with TWO (2) specific examples for each control.

(12 marks)

(ii)Identify and explain FOUR (4) assertions based audit procedures, with ONE (1) example for each procedure.

(8 marks)