Question 2

(a)ISA 500 Audit Evidence states that the auditor should use assertions for classes oftransactions, account balances and presentation and disclosures in sufficient detail to form a basis for the assessment of risks of material misstatement and the design and performance of further audit procedures.

Required:

(i)Explain the meaning of 'sufficiency' and 'appropriateness' in the context of audit evidence. Provide ONE (1) relevant example for each term.

(4 marks)

(ii)Give FOUR (4) examples of audit evidence under each of the following categories:

1. Evidence obtained from independent sources outside the entity

2. Evidence generated internally by the entity

3. Evidence obtained directly by the auditor

4. Evidence obtained indirectly by the auditor

(16 marks)

(iii)Distinguish a negative confirmation letter from a positive confirmation letter.

(4 marks)

(B)Understanding the control elements and control activities are important to auditors.

Required:

(i)Identify and explain any FOUR (4) elements of the control environment that are being affected by the information technology system. (8 marks)

(ii)Discuss FOUR (4) categories of control activities that are being affected by the information technology system. (8 marks)

(Total: 40 marks)*