QUESTION ONE The main objective of an audit is to enable the auditor express an opinion on the financial statements being audited. ISA 700/701 requires that the auditors opinion should state whether the financial statements give a true and fair view and are fairly presented in all material respects in accordance with applicable financial reporting framework where an unmodified opinion is expressed. Required: Explain what is meant by true and fair view. 5marks

Unbalanced and Co. Ltd. is a trading company at Abossey Okai. It deals in auto parts. It is owned by a husband and wife; Divine and Grace. Divine travels to South Korea twice a year to buy auto parts for the business whilst Grace run the day to day administration of the shop. Divine borrows (loans) from friends to add up to the companys money to buy parts when he travels. These loans are repaid when the goods are sold back home. The loans are not receipted. Some of the loans are banked, others are not. The companys money and the loans collected are changed into foreign currency, some through the bank, and others not through the bank. The company does not keep receipts for air tickets, hotel bills and the expenses made by the owners. However, Divine can reel off what he paid without batting an eyelid. Import duties are paid by bankers drafts so those are clearly stated in the bank statements. Grace has a note book in which she enters the daily sales but the records in the book is scanty. However, all imports invoices are properly filed. Most of the sales are banked and the bank statements are readily available. Grace is assisted by one attendant. The success of the business, you understand, depends on the vigilance and strictness of the owners.

Required:

i)Identify the business risks in the passage and explain why they are risks. 5marks ii) What general factors would you consider when planning the audit? 5marks