⋆
]]
AUE2601: AUDITING THE-
ORY AND PRACTICE
OCT/NOV Examination 2026 Preparation
Covers Past Papers: OCT/NOV 2023, OCT/NOV 2024 & OCT/NOV 2025
⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆
Auditing Theory and Practice – College of Accounting Sciences
Exam Revision Guide
AUE2601
Module Code:
Auditing Theory and Practice
Module Name:
OCT/NOV 2026 (Prep: 2023–2025)
Paper / Exam:
100 marks (2-hour paper)
Total Marks:
70% Level 1 (Knowledge) + 30% Level 2
Format: (Application)
All questions answered with study-note depth. Focus on understanding, not memori-
sation.
Exam Revision Notes | AUE2601 | OCT/NOV 2026
,AUE2601 | Auditing Theory & Practice – Exam Revision OCT/NOV 2026 Prep
Question 1 [25 marks] – Topic 1 & 2: Auditing Theory, Types of Auditors & Assurance
Engagements
(a) [6 marks]
Question: Define the term “auditing” and explain the primary objective of an external
auditor conducting a statutory audit of financial statements, with reference to ISA 200.
Answer:
Key Concept
Auditing is an independent, systematic examination of financial statements and ac-
counting records of an entity to determine whether they fairly present the entity’s fi-
nancial position and results in accordance with an applicable financial reporting frame-
work (e.g. IFRS).
According to ISA 200, the overall objective of the independent auditor is to:
• Obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error.
• Express an opinion on whether the financial statements are prepared, in all material re-
spects, in accordance with the applicable financial reporting framework.
• Report on the financial statements and communicate findings as required by the ISAs.
Exam Tip
Reasonable assurance is a high but not absolute level of assurance. The auditor
can never provide absolute assurance because of the inherent limitations of an audit
(sampling, judgment, etc.).
(b) [9 marks]
Question: Distinguish between the following types of auditors, providing the regulatory
body and employer for each: (i) External auditor; (ii) Internal auditor; (iii) Government
auditor (Auditor-General). (3 marks each)
Answer:
Page 2 of 27
,AUE2601 | Auditing Theory & Practice – Exam Revision OCT/NOV 2026 Prep
(i) External Audi- (ii) Internal Audi- (iii) Auditor-
Aspect
tor tor General
Registered audit firm The entity being au- Government (inde-
Employer
/ public accounting dited (employee) pendent constitu-
firm tional institution)
IRBA (Independent IIA (Institute of In- PFMA and Constitu-
Regulatory body
Regulatory Board for ternal Auditors) tion of SA (s181)
Auditors) – Auditing
Profession Act 26 of
2005
Express independent Evaluate and improve Audit government
Primary purpose
opinion on annual internal controls, risk departments, public
financial statements management and entities and munici-
governance palities
Independent from the Not fully independent Constitutionally inde-
Independence
entity (employed by entity) pendent
(c) [5 marks]
Question: Explain the concept of the “expectation gap” in auditing and list THREE
causes thereof.
Answer:
The expectation gap is the difference between what the public (financial statement users)
expect the auditor to do and what the auditor is actually required to do under auditing stan-
dards.
Three causes of the expectation gap:
1. Perceived guarantee: The public believes a clean (unqualified) audit report means the
company is financially healthy and will not fail, whereas the auditor merely confirms the
financial statements are fairly presented.
2. Fraud detection expectations: Users expect the auditor to detect all fraud, while the
auditor is only required to obtain reasonable assurance that the statements are free from
material misstatement.
3. Absolute assurance misunderstanding: Users believe the audit provides absolute as-
surance, when in reality it provides reasonable assurance due to inherent limitations.
Page 3 of 27
,AUE2601 | Auditing Theory & Practice – Exam Revision OCT/NOV 2026 Prep
(d) [5 marks]
Question: Distinguish between an assurance engagement and a non-assurance
engagement, and give ONE example of each.
Answer:
Aspect Assurance Engagement Non-Assurance Engagement
Definition The practitioner expresses a con- The practitioner performs pro-
clusion designed to enhance the cedures but does NOT express a
degree of confidence of intended conclusion intended to give any
users about the outcome of the assurance
evaluation of subject matter
against criteria
Opinion/ConclusionYes – conclusion is expressed No conclusion or assurance is
given
Standard ISAE, ISA or ISRE ISRS
Example Statutory audit of financial state- Compilation of financial state-
ments; review engagement ments; agreed-upon procedures
Page 4 of 27
, AUE2601 | Auditing Theory & Practice – Exam Revision OCT/NOV 2026 Prep
Question 2 [25 marks] – Topic 3: SAICA Code of Professional Conduct & Ethics
(a) [10 marks]
Question: The SAICA Code of Professional Conduct identifies FIVE fundamental
ethical principles that all professional accountants must comply with. Name and briefly
explain each principle. (2 marks each)
Answer:
Key Concept
The five fundamental principles are established in the SAICA Code of Professional
Conduct (equivalent to the IESBA Code) and apply to all Chartered Accountants and
registered auditors in South Africa.
1. Integrity: A professional accountant must be straightforward and honest in all profes-
sional and business relationships. Integrity implies fair dealing and truthfulness.
2. Objectivity: A professional accountant must not allow bias, conflict of interest or undue
influence of others to override professional or business judgments. The accountant must
remain impartial and independent in mind.
3. Professional Competence and Due Care: A professional accountant must maintain
professional knowledge and skill at the level required to ensure that a client or employer
receives competent professional service. This includes acting diligently and in accordance
with applicable technical and professional standards.
4. Confidentiality: A professional accountant must respect the confidentiality of informa-
tion acquired as a result of professional and business relationships and must not disclose
such information to third parties without proper or specific authority or unless there is a
legal or professional right or duty to disclose.
5. Professional Behaviour: A professional accountant must comply with relevant laws and
regulations and avoid any action that discredits the profession. This includes behaving in
a manner consistent with the profession’s responsibility to act in the public interest.
Exam Tip
Use the mnemonic IOPCB: Integrity, Objectivity, Professional Competence, Confi-
dentiality, Behaviour to remember all five. In exams, always link the principle to the
scenario facts.
Page 5 of 27
]]
AUE2601: AUDITING THE-
ORY AND PRACTICE
OCT/NOV Examination 2026 Preparation
Covers Past Papers: OCT/NOV 2023, OCT/NOV 2024 & OCT/NOV 2025
⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆ ⋄ ⋆
Auditing Theory and Practice – College of Accounting Sciences
Exam Revision Guide
AUE2601
Module Code:
Auditing Theory and Practice
Module Name:
OCT/NOV 2026 (Prep: 2023–2025)
Paper / Exam:
100 marks (2-hour paper)
Total Marks:
70% Level 1 (Knowledge) + 30% Level 2
Format: (Application)
All questions answered with study-note depth. Focus on understanding, not memori-
sation.
Exam Revision Notes | AUE2601 | OCT/NOV 2026
,AUE2601 | Auditing Theory & Practice – Exam Revision OCT/NOV 2026 Prep
Question 1 [25 marks] – Topic 1 & 2: Auditing Theory, Types of Auditors & Assurance
Engagements
(a) [6 marks]
Question: Define the term “auditing” and explain the primary objective of an external
auditor conducting a statutory audit of financial statements, with reference to ISA 200.
Answer:
Key Concept
Auditing is an independent, systematic examination of financial statements and ac-
counting records of an entity to determine whether they fairly present the entity’s fi-
nancial position and results in accordance with an applicable financial reporting frame-
work (e.g. IFRS).
According to ISA 200, the overall objective of the independent auditor is to:
• Obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error.
• Express an opinion on whether the financial statements are prepared, in all material re-
spects, in accordance with the applicable financial reporting framework.
• Report on the financial statements and communicate findings as required by the ISAs.
Exam Tip
Reasonable assurance is a high but not absolute level of assurance. The auditor
can never provide absolute assurance because of the inherent limitations of an audit
(sampling, judgment, etc.).
(b) [9 marks]
Question: Distinguish between the following types of auditors, providing the regulatory
body and employer for each: (i) External auditor; (ii) Internal auditor; (iii) Government
auditor (Auditor-General). (3 marks each)
Answer:
Page 2 of 27
,AUE2601 | Auditing Theory & Practice – Exam Revision OCT/NOV 2026 Prep
(i) External Audi- (ii) Internal Audi- (iii) Auditor-
Aspect
tor tor General
Registered audit firm The entity being au- Government (inde-
Employer
/ public accounting dited (employee) pendent constitu-
firm tional institution)
IRBA (Independent IIA (Institute of In- PFMA and Constitu-
Regulatory body
Regulatory Board for ternal Auditors) tion of SA (s181)
Auditors) – Auditing
Profession Act 26 of
2005
Express independent Evaluate and improve Audit government
Primary purpose
opinion on annual internal controls, risk departments, public
financial statements management and entities and munici-
governance palities
Independent from the Not fully independent Constitutionally inde-
Independence
entity (employed by entity) pendent
(c) [5 marks]
Question: Explain the concept of the “expectation gap” in auditing and list THREE
causes thereof.
Answer:
The expectation gap is the difference between what the public (financial statement users)
expect the auditor to do and what the auditor is actually required to do under auditing stan-
dards.
Three causes of the expectation gap:
1. Perceived guarantee: The public believes a clean (unqualified) audit report means the
company is financially healthy and will not fail, whereas the auditor merely confirms the
financial statements are fairly presented.
2. Fraud detection expectations: Users expect the auditor to detect all fraud, while the
auditor is only required to obtain reasonable assurance that the statements are free from
material misstatement.
3. Absolute assurance misunderstanding: Users believe the audit provides absolute as-
surance, when in reality it provides reasonable assurance due to inherent limitations.
Page 3 of 27
,AUE2601 | Auditing Theory & Practice – Exam Revision OCT/NOV 2026 Prep
(d) [5 marks]
Question: Distinguish between an assurance engagement and a non-assurance
engagement, and give ONE example of each.
Answer:
Aspect Assurance Engagement Non-Assurance Engagement
Definition The practitioner expresses a con- The practitioner performs pro-
clusion designed to enhance the cedures but does NOT express a
degree of confidence of intended conclusion intended to give any
users about the outcome of the assurance
evaluation of subject matter
against criteria
Opinion/ConclusionYes – conclusion is expressed No conclusion or assurance is
given
Standard ISAE, ISA or ISRE ISRS
Example Statutory audit of financial state- Compilation of financial state-
ments; review engagement ments; agreed-upon procedures
Page 4 of 27
, AUE2601 | Auditing Theory & Practice – Exam Revision OCT/NOV 2026 Prep
Question 2 [25 marks] – Topic 3: SAICA Code of Professional Conduct & Ethics
(a) [10 marks]
Question: The SAICA Code of Professional Conduct identifies FIVE fundamental
ethical principles that all professional accountants must comply with. Name and briefly
explain each principle. (2 marks each)
Answer:
Key Concept
The five fundamental principles are established in the SAICA Code of Professional
Conduct (equivalent to the IESBA Code) and apply to all Chartered Accountants and
registered auditors in South Africa.
1. Integrity: A professional accountant must be straightforward and honest in all profes-
sional and business relationships. Integrity implies fair dealing and truthfulness.
2. Objectivity: A professional accountant must not allow bias, conflict of interest or undue
influence of others to override professional or business judgments. The accountant must
remain impartial and independent in mind.
3. Professional Competence and Due Care: A professional accountant must maintain
professional knowledge and skill at the level required to ensure that a client or employer
receives competent professional service. This includes acting diligently and in accordance
with applicable technical and professional standards.
4. Confidentiality: A professional accountant must respect the confidentiality of informa-
tion acquired as a result of professional and business relationships and must not disclose
such information to third parties without proper or specific authority or unless there is a
legal or professional right or duty to disclose.
5. Professional Behaviour: A professional accountant must comply with relevant laws and
regulations and avoid any action that discredits the profession. This includes behaving in
a manner consistent with the profession’s responsibility to act in the public interest.
Exam Tip
Use the mnemonic IOPCB: Integrity, Objectivity, Professional Competence, Confi-
dentiality, Behaviour to remember all five. In exams, always link the principle to the
scenario facts.
Page 5 of 27
