4.1 The evidence that is gathered by an auditor plays a crucial role in the results of the audit and the recommendations that are provided to management. When gathering evidence with regard to financial misstatements, the auditor is presented with THREE (3) various types of misstatements that could occur at financial statement and assertion level. Discuss these misstatements. (10 marks) 4.2 The evidence that is gathered by an auditor plays a crucial role in the results of the audit and the recommendations that are provided to management. There are TWO (2) attributes with regard to evidence that an auditor will need to meet before concluding the audit. What are these attributes and why are they important? (10 marks)
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There are three types of misstatements that could occur at the financial statement and assertion level: Show more…
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The report produced by the auditor should be the first thing that a user of a financial report reads. It is only having read the audit report that the user can have any confidence that the contents of the financial report are a reasonable representation of the financial position and performance of the company. In order to understand what comfort the audit report gives, any user must understand what an audit is, the role of the auditor and the role played by management and the board of directors of the company. The amount of information included in the auditor's report has increased in recent years in an attempt to reduce the expectation gap. Required (a) Discuss the advantages and disadvantages of the standardisation of audit reports. (b) Explain the following components of an auditor's report and discuss why they are important: (i) auditor's and directors' responsibilities. (ii) independence. (iii) audit opinion.
Akash M.
(a) Discuss the quality of ONE (1) of the following types of audit evidence, giving appropriate examples: (i) Evidence originated by the auditors (ii) Evidence created by third parties (5 marks) (b) Describe the general considerations which auditors must bear in mind when evaluating audit evidence. (5 marks)
Auditors must make judgments about various aspects of an audit on the basis of their own direct experience, indirect experience, or a combination of the two. In a study, auditors were asked to make judgments about the frequency of errors to be found in an audit. The judgments by the auditors were then compared to the actual results. Suppose the following data were obtained from a similar study; lower scores indicate better judgments. $$\begin{array}{ccc}\text { Direct } & \text { Indirect } & \text { Combination } \\17.0 & 16.6 & 25.2 \\18.5 & 22.2 & 24.0 \\15.8 & 20.5 & 21.5 \\18.2 & 18.3 & 26.8 \\20.2 & 24.2 & 27.5 \\16.0 & 19.8 & 25.8 \\13.3 & 21.2 & 24.2\end{array}$$ Use $\alpha=.05$ to test to see whether the basis for the judgment affects the quality of the judgment. What is your conclusion?
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