TEST TWO AUDITING 3A MAY 2018 UNIVERSITY OF ZULULAND University of Zululand, Private Bag X1001, KwaDlangezwa, 3886 W: www.unizulu.ac.za FACULTY OF COMMERCE, ADMINISTRATION & LAW DEPARTMENT OF ACCOUNTING AND AUDITING TEST 2 - MAY 2018 CAUD301 AND CADD301 - AUDITING 3A DURATION - READING: 5 MINUTES DURATION - WRITING: 55 MINUTES FULL MARKS: 40 Internal examiner: Mr MC Gwala CA(SA) Internal Moderator: Mr JD Chambers CA(SA) INSTRUCTIONS TO STUDENTS: 1. This paper consists of one question (set out on pages 2 to 3). Ensure that your paper is complete. 2. Where more than one answer book has been used, clearly identify the sections answered on the cover of each answer book. 3. Fill in all the details as required on the front of each answer book handed in. 4. Use only blue or black ink, Do not write in pencil; pencil-written work will not be marked. 5. On completion, insert all answer books in numerical order under the cover of the answer book in which you commenced answering. 6. Work neatly and logically. A maximum of 10% of the marks will be awarded for pervasive skills (communication, language, writing style, clarity of expression, presentation, logical and well- constructed answers). 7. In answering the questions, record any assumptions you may consider necessary. No questions will be answered by invigilators during the exam. 8. Clearly separate the different sections of your answer and where applicable start every new (required) question on a new page of your answer book. 9. Read the REQUIRED section properly, more than once and again while answering the question to ensure you provide a direct adequate response. 10. Do not open the question paper until instructed to do so by the invigilating team. 11. Marks may be deducted where instructions (including those of invigilators) are not followed and/or at the discretion of the marker for answers considered to be severely unbecoming. : - 1 :
MAY 2018 40 Marks AUDITING 3A TEST TWO QUESTION 1 You are a partner at PricewaterhouseTroopers Inc. (PwT), a firm of chartered accountants and registered auditors, and you are a member of a three-person panel tasked with deciding whether new clients should be accepted by the firm. You are currently evaluating three prospective clients and in addition to this you are also responsible for one audit client, Stah Travel (Pty) Ltd (Stah Travel). Stah Travel was recently allocated to your portfolio during the year and you requested an audit trainee to commence with the planning of the audit after the pre-engagement activities were successfully performed. Prospective clients: The information below relates to three prospective clients that have to be assessed for client acceptance by the panel of which you are a member: 1. Life Africa Ltd (LA), a JSE-listed company, markets life- insurance products and related financial services in South Africa and in 14 other countries on the African continent. LA was recently fined an amount of US$2.6 billion by regulators in one of the countries in which it operates (one of the