COAUA2 Revision Question pack

THE AUDITING PROFESSION 8 Marks

Question 1
What are the functions of the Independent Regulatory Board of Auditors? (8 Marks)

AUDITING AND ETHICS

Question 2 13 Marks

Study the scenario and complete the questions that follow:

Henri Kluever
Auditor-General of South Africa, 1993–1999

“I was honoured to have been

the first Auditor-General in our new democracy
and attempted at all times to deal with
my task professionally and objectively, honouring
and promoting the principles of good governance through accountability.”

Source: Kluever, H. (2000). ‘Transformation in the South African Audit

Office.’ Auditing SA, 2000(24), pp. 9–12. Available at:
https://hdl.handle.net/10520/AJA10289003_157 [Accessed: 15 Jul. 2021].

2.1 Why does the SAICA Code of Professional Conduct promote a conceptual
framework rather than simply present a set of rules to which professional
accountants must adhere?
(4 Marks)
2.2 In addition to exercising professional judgment when applying the conceptual
framework, a professional accountant is obliged to consider further
requirements. What are they? (4 Marks)
2.3 What are the fundamental principles outlined in the SAICA Code of
Professional Conduct that each professional accountant can use to guide their
conduct? (5 Marks)
Source: Adapted from Adams, A., Diale, T., & Richard, G. (2020). Graded Questions
on Auditing 2021. Durban: LexisNexis.

THE AUDIT PROCESS 25 Marks

Study the chart and complete the questions that follow:

Auditing Process Flowchart

Source: WikiAccounting (2019). Key Audit Processes in an Audit of Financial

Statements. [Online] Available at: https://www.wikiaccounting.com/audit-process/
[Accessed: 20 July 2021]

Question 3
Read through the following statements and decide whether the statements are True
or False. If your answer is false, please provide the correct statement.

Record your answers as shown in the following example:

5.13 True
5.13 False: the correct statement

3.1 The person responsible for planning the audit is the engagement partner.
3.2 The auditor does not need to gain an understanding of the organisation that is
being audited.
3.3 Conflict of interest will not interfere with the audit.
3.4 Resource planning refers to gathering sufficient staff and expertise.
3.5 Risk assessment includes enquiries of management, analytical procedures,
observation, and inspection.
3.6 Planning materiality will help the auditor in determining the nature, timing, and
extent of audit procedures.
3.7 When planned materiality has been calculated, the level is static and does not
change during or at the completion of the audit.
3.8 The audit approach is largely dependent on the quality and effectiveness of
the entity being audited.
3.9 Internal controls can only be validated by management of the entity being
audited.
3.10 When testing financial data, an auditor needs to obtain sufficient, appropriate
evidence for each assertion of the financial statements.
3.11 Auditing sampling provides unequivocal evidence that the financial statements
are free from material misstatement.
3.12 An unqualified audit report indicates that the entity’s financial statements are
free from material misstatement.
(17 Marks)

Question 4
Explain the meaning and components of audit risk. (8 Marks)
THE NATURE OF AUDITING AND THE REGULATORY ENVIRONMENT
18 Marks

Question 5

Study the scenario and complete the questions that follow:

PowerStruggles

You are chatting to a close friend of yours, Vincent Nzimande, an engineer, after a
game of squash one evening and he tells you that he is purchasing the majority
(75%) holding in a private company, Shares-a-lot (Pty) Ltd. In addition, he will be
the managing director but will retain the services of the two existing directors in the
company, neither of whom are shareholders. (There are four other shareholders.)

He also informs you that the company has about 27 employees, that the expected
turnover for the year is R24 million, and that the only liabilities the company has
are current creditors of less than R1 million. Vincent has just been told by his
attorney, who is responsible for the formalities related to the purchase of the
company, that at the next annual general meeting of the company an auditor will
have to be appointed. Vincent is concerned about this and, knowing that you are in
the auditing profession, he asks you to respond the following questions:

Source: Adapted from Gowar, H. R. and Jackson, R. D. C. (2015). Graded

Questions on Auditing. 2016. Durban: LexisNexis.

5.1 May I appoint an auditor or may I retain the existing one? (2 Marks)
5.2 Can I appoint you as the auditor of Shares-a-lot (Pty) Ltd? (6 Marks)

Question 6
I know there are requirements for the individual registration as an auditor, but I do
not know what they are. Can you please explain them to me? (10 Marks)
FRAUD 24 Marks

Question 7
Study the scenario and complete the questions that follow:

Tender Score (Pty) Ltd

You are a junior auditor on a team engaged in the audit of Tender Score (Pty) Ltd.
While on lunch, you overhear a conversation between two employees of Tender
Score (Pty) Ltd about the use of a company vehicle. One of the employees
(Megan) told the other (John) that she needed to go and buy medicine for her sick
daughter but she does not have transport. John told her to use the company
vehicle to quickly go and buy some. John went on to say: “I use it all the time for
personal stuff and no one ever finds out! Besides, you save money because the
company pays for the fuel!”

Source: Gregory, H. C. (2021).

Explain the difference between error and fraud and provide an example of each.
(4 Marks)

Question 8
Refer to the above scenario: Megan approached her manager and asked if she
could use the vehicle to go to the pharmacy to buy some medicine for her daughter.
He manager indicated that he was going to the bank to deliver a company contract.
The pharmacy was on the way, and he offered her a lift.

Discuss whether the use of Tender Score (Pty) Ltd’s vehicle in this case constitutes
fraud. (8 Marks)

Question 9
Refer to the above scenario: Megan approached her manager and asked if she
could use the vehicle to go to the pharmacy to buy some medicine for her daughter.
Her manager stated that the vehicle may only be used for company business and
that, unfortunately, she may not use the company vehicle. When John heard what
the manager said, he decided he would go to the pharmacy for Megan, since he
uses the vehicle all the time. Megan was eternally grateful to him as she did not want
to “break” the rules.

Discuss whether the use of Tender Score (Pty) Ltd’s vehicle in this case constitutes
fraud. (12 Marks)