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Auditing Class Test 3 MEMO

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43 views

Auditing Class Test 3 MEMO

test answers

Uploaded by

Monique
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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CAUA3751 – Class Test 3 – 2 May 2017

Question 1(a)

 Stage 1, Understanding the entity and its environment

 Stage 2, Assess the risk of material misstatement in the financial statements

 Stage 3, Determine materiality

 Stage 4, Establish the overall audit strategy

 Stage 5, Develop an audit plan

Question 1(b)

 Inherent Risk

 Built-in risk in an account balance/transaction

 Risk that exists before internal controls are put in place!!!

 Risks related to specific type of industry and type of client

 Control Risk

 If the entity’s internal controls are NOT working as intended

 There is a risk that misstatement will occur (that will NOT be addressed by the client)

 Detection risk

 Risk that the auditor will not detect a misstatement that exists and could be material

Question 1(c)

 Overall audit strategy - Sets the scope, timing, and direction of the audit.

 Audit plan - Relates to nature, timing and extent of duties of specialists.

Question 1(d)

1. Tests of control – testing the effectiveness of the client’s internal control environment.
2. Substantive tests – testing the line items of the financial statements in the manner of tests
of details or analytical procedures.

Question 2

 The company imports large quantities of stock. (Inventory – Valuation)

 The company imports large quantities of stock. (Accounts Payable – Valuation due to
currency calculations)

 The products sold by Supermarket (Pty) Ltd have expiry dates, after which they are not
useable. (Inventory – Valuation)

 80% of the company’s sales are for cash. (Sales – Completeness)

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