Your firm of Certified Public Accountants has had a large number of applicants for a recent advertised vacancy. It has been decided to test applicants' knowledge of some aspects of auditing in the initial interview. The senior partner has asked you to prepare sample answers to the following questions that will be used by the interview team in the initial screening interviews:

(a) What are the two (2) indicators that show a company is facing a liquidity problem?

Explain the role of auditors in ensuring the financial viability of the company.

(b) Justify why it is better to use positive rather than negative circularization of debtor confirmation letter and explain two (2) alternative audit procedures when auditors did not receive any response from the debtors.

(c) Explain the relationship between effectiveness of internal control of the audit client and the audit strategy used in an audit assignment and discuss why auditors should consider the cost and benefits when an audit procedure is performed.

(d) Explain the difference between misstatements which are regarded as "material but not

pervasive" and "material and pervasive" and discuss their implications on reporting the

audit findings of an audit client. Use examples to illustrate your answers as far as possible.

(e) Explain why it is important to safeguard the "public confidence" over the auditing function and suggest two (2) ways to strengthen such confidence from the public.