The directors receive a year-end bonus based on the percentage of profit increase from the previous year, this is normally paid three months after the year once the financial statements have been finalised and audited.
a. Describe and explain using suitable and relevant examples FIVE inherent limitations of internal controls. (5 marks)
b. From the above scenario, write a memo to the audit team explaining FIVE internal controls that you would expect to find within the payroll department of Dartmouth Construction Limited. (Note: Where necessary, you can expand on the scenario in order to illustrate the points that you’re making). (15 marks)
(a) Identify and briefly describe the main contents of an unmodified audit report.
(b) Explain your understanding of ‘Emphasis of Matter’ paragraph. Illustrate your answer with TWO relevant examples
(c) Explain your understanding of the following different types of modified opinions, using TWO suitable examples for each opinion:
(a) Write a memo to the audit team explaining FIVE ethical threats identified from the above scenario (Note: You can develop the scenario further to illustrate the points which you may wish to make).
(b) For each of the threats identified in (a) explain how it might be reduced or eliminated to an acceptable level.
(a) Explain your understanding of ‘sufficient appropriate evidence’.
(b) Audit evidence can be obtained from a variety of different sources. Identify the main sources of audit evidence and their degree of reliability, giving a suitable and relevant example of each.
(c) Identify and describe using suitable and relevant examples TWO procedures that the auditor would use to obtain audit evidence.