Question B2 Part I Auditors are required to set the specific audit objectives for testing the stated financial statement assertions when performing audit procedures, namely, classification, valuation, occurrence, completeness, cut-off, existence, valuation and right/ownership. Further, auditors are needed to collect competent and sufficient appropriate audit evidences. Required: (a) Helen, the audit trainee, is conducting a field audit. She has no idea of how to identify the competent audit evidences when performing audit procedures. You, the audit manager, are required to explain to her what factors highly affect the competence of audit evidences. (5 marks) (b) In each of the four following situations, you, the auditor, face two sources of evidence resulting from your audit procedures. Situation Source A Source B (1) Observation of the client's physical Confirmation of the client's counting of inventories at the year- inventories held at an independent end. pubic warehouse by requesting a confirmation from that warehouse management. (2) Confirmation of the client's bank Checking the balance of the client's balance at the year-end directly bank accounts against the bank with the bank. statement kept by the client. For each of the above two situations, identify which of the two sources gives more reliable evidence, and give ONE reason to support your choice by using the following table. (4 marks) Page 8 of 13 Situation Source (A or B) Reason (1) (2)Part II Assume you are the external audit manager of ABC Trading Limited, you are required to set ONE most appropriate specific audit objective for each of the following situation. (9 marks) Situation Audit Incident Objective (1) All purchases transactions that should have been recorded have been recorded (2) Purchases transactions have been recorded in the proper accounts. (3) Sales transactions have been properly recorded in the correct accounting period (4) Trade receivables have been included in the financial statements at appropriate amount. (5) Inventories that have been recorded exist. (6) The entity holds the right to inventories. (7) Recorded payroll transactions are for goods and services actually received by the client. 8 Cash balances have been included in the financial statements at appropriate amount. (9) All bank balances that should have been recorded have been recorded