What are the implications if management refuses to sign a management representation letter? If management signs a management representation letter, is that a good indication that all of management's statements described in the letter are actually true? (5 marks) b List five factors that may indicate that a client may not remain a going concern. For each indicate the degree of subjectivity and judgment that would be required in determining if the indicator would, in fact, result in the company going bankrupt. (10 marks) QUESTION TWO a As the engagement partner, you have reviewed the audit working papers of Royal Height Limited. The audit team has highlighted the following matters in the working papers 1. Thirty percent of the company's recorded turnover (revenue) comprises of cash sales. Proper records of cash sales have not been maintained. Consequently, the audit team was unable to design audit procedures to verify the cash sales 2. During the current year, the company changed the method of charging depreciation on its fixed assets from the straight line to the diminishing balance method. However, all the required disclosures have been included in the notes to the financial statements Required: Discuss the impact of each of the above matters on your audit report. 1 (10 marks) b Identify the basic types of audit reports other than a standard unqualified audit report and explain the circumstances under which each type of report is appropriate (10 marks) QUESTION THREE a What is the primary difference between fraud and errors in financial statement reporting? (4 marks) If one of the three elements of the fraud triangle is not present, can fraud still be perpetrated? Explain (S marks) You are asked to be interviewed by a student newspaper regarding the nature of accounting fraud. The reporter says, "As I understand it, asset misappropriations are more likely to be found in small organizations, but not in larger organizations. On the other hand, fraudulent financial reporting is more likely to be found in larger organizations. "How would you respond to the reporter's observation? (6 marks) QUESTION FOUR What is meant by the term quality control as it relates to a CPA firm? (4 marks) b Any person being considered for employment by the firm must have completed a basic auditing course and have been interviewed and approved by an audit partner of the firm before he or she can be hired for the audit staff Which element of quality control does