Question $1$

Discuss the similarities and differences between the roles of external auditors and

internal auditors.

Question $2$

Your CPA firm is considering about whether to act as the new auditor of DTA Limited,

which is introduced by the former audit partner of your firm, who now acts as the CFO

of DTA Limited after leaving the CPA firm last year. Your firm has very little

experience in this industry.

DTA Limited is a listed company that manufactures high quality computer components,

which are constantly evolving. It has good accounting and internal control systems and

a good set of perpetual inventory records. Significant transactions between the company

and its subsidiaries are conducted.

All staff and directors of DTA Limited are remunerated mainly on a performance$-$

related scheme, some with share options. Staff are generally highly qualified and well$-$

paid.

Recently, there is pressure from institutional investors for better returns.

Required

a$)$ What should the CPA firm do and consider before accepting the engagement? Do

you have any concerns regarding the acceptance of DTA Limited as the audit client?

b$)$ Assume that your firm has finally accepted the engagement. Identify ALL different

factors you are aware of$.$ For each factor, explain its effect on the audit risk model

component involved.

c$)$ After the risk assessment in part $($b$),$ what is the implication to the amount of audit

evidence required?