Question 2 (20 marks) 1. Briefly explain what the finance and investment cycle deals with and describe three characteristics of the finance and investment cycle which distinguish it from the other cycles.(6) Page 15 of 18 FACULTY OF COMMERCE, MANAGEMENT AND LAW 2. Identify four types of transaction which will affect the "equity" section of the statement of financial position of a company, 3. Comment briefly on the following in relation to the Finance and Investment cycle: 3.1 frequency of transactions. 3.2 size (materiality) of transactions. 3.3. internal controls relating to transactions. 3.4 legal and regulatory requirements. 3.5 documentation. (2) (5) 4. Comment on how the factors listed below would affect your evaluation of the risk of material misstatement in the financial statements of Chadwick (Pty) Ltd and discuss your firm's overall response thereto. (7) Chadwick (Pty) Ltd concluded a number of material transactions in the finance and investment cycle in the year under audit. Management of Chadwick (Pty) Ltd, including those in the accounting department, lacked knowledge and an appropriate understanding of the complexities of the financial reporting standards relating to these transactions.