AUE3701 – MAY / JUNE 2018 SECOND EXAM PAPER SOLUTIONS
QUESTION 1 (a) AND (b)
RISK INDICATORS AT THE DESCRIPTION OF THE AUDIT RISKS OF MATERIAL
FINANCIAL STATEMENT MISSTATEMENT AT THE FINANCIAL STATEMENT LEVEL
LEVEL
AFRICHIC OFFERS AN THE AFS MAY BE MATERIALLY MISSTATED DUE TO ERROR,
EXTENSIVE RANGE OF AS AFRICHIC CONDUCTS BUSINESS INTERNATIONALLY AND
LOCAL AND IMPORTED THE ACCOUNTING TREATMENT FOR FOREX TRANSACTIONS
PRODUCTS ARE COMPLEX
OPERATES IN AN INDUSTRY THE AFS MAY BE MATERIALLY MISSTATED DUE TO
WHICH IS REGULATED BY ERROR/FRAUD AS AFRICHIC MIGHT
THE COMPETITION INTENTIONALLY/UNINTENTIONALLY NOT COMPLY WITH
COMMISSION OF SOUTH THE RELEVANT LAWS AND REGULATIONS, WHICH COULD
AFRICA (CCSA) LEAD TO PENALTIES AND OR CLOSURE OF THE BUSINESS
THE AUDIT FIRM THE AUDIT TEAM MAY NOT BE FAMILIAR WITH THE RULES
NORMALLY RENDERS AND THE REGULATIONS OF THE RETAIL INDUSTRY AND
SERVICES IN THE MINING THUS THE AFS MAY BE MATERIALLY MISSTATED, AS THE
INDUSTRY AUDIT TEAM MIGHT UNINTENTIONALLY NOT COMPLY
WITH THE RULES OR REGULATIONS OF THE INDUSTRY
THERE IS AN EXTREMELY THE FOLLOWING RISKS EXIST:
TIGHT AUDIT DEADLINE THE AFS MAY BE MATERIALLY MISSTATED AS THE
AUDITOR MAY NOT HAVE SUFFICIENT TIME TO
OBTAIN THE NECESSARY AUDIT EVIDENCE,
RESULTING IN MATERIAL MISSTATEMENTS GOING
UNDETECTED
THE AFS MAY BE MATERIALLY MISSTATED DUE TO
ERROR AS THE FINANCIAL RESULTS PREPARED BY
AFRICHIC MIGHT BE INCOMPLETE DUE TO TIME
PRESSURE, THUS NOT HAVING SUFFICIENT TIME TO
IDENTIFY, ACCOUNT FOR AND DISCLOSE
SUBSEQUENT EVENTS
NEW AUDIT CLIENT THE FOLLOWING RISKS EXIST:
THE AFS MAY BE MATERIALLY MISSTATED DUE TO
ERRORS AS THE OPENING BALANCES MAY BE
INCORRECT AS OUR AUDIT FIRM WAS NOT THE
AUDIT FIRM IN THE PRIOR YEAR
THE AFS MAY BE MATERIALLY MISSTATED AS
MISSTATEMENTS COULD GO UNDETECTED AS WE
ARE UNFAMILIAR WITH THE CLIENT
MANAGEMENTS INTEGRITY THE AFS MAY BE MATERIALLY MISSTATED AS THE CONTROL
IS QUESTIONABLE ENVIRONMENT MIGHT BE COMPROMISED BY
MANAGING MANAGEMENT WHO LACK INTEGRITY. THIS COULD LEAD
PARTNER IS THE TO ERRORS AND MISSTATEMENTS DUE TO FRAUD IN THE
QUESTION 1 (a) AND (b)
RISK INDICATORS AT THE DESCRIPTION OF THE AUDIT RISKS OF MATERIAL
FINANCIAL STATEMENT MISSTATEMENT AT THE FINANCIAL STATEMENT LEVEL
LEVEL
AFRICHIC OFFERS AN THE AFS MAY BE MATERIALLY MISSTATED DUE TO ERROR,
EXTENSIVE RANGE OF AS AFRICHIC CONDUCTS BUSINESS INTERNATIONALLY AND
LOCAL AND IMPORTED THE ACCOUNTING TREATMENT FOR FOREX TRANSACTIONS
PRODUCTS ARE COMPLEX
OPERATES IN AN INDUSTRY THE AFS MAY BE MATERIALLY MISSTATED DUE TO
WHICH IS REGULATED BY ERROR/FRAUD AS AFRICHIC MIGHT
THE COMPETITION INTENTIONALLY/UNINTENTIONALLY NOT COMPLY WITH
COMMISSION OF SOUTH THE RELEVANT LAWS AND REGULATIONS, WHICH COULD
AFRICA (CCSA) LEAD TO PENALTIES AND OR CLOSURE OF THE BUSINESS
THE AUDIT FIRM THE AUDIT TEAM MAY NOT BE FAMILIAR WITH THE RULES
NORMALLY RENDERS AND THE REGULATIONS OF THE RETAIL INDUSTRY AND
SERVICES IN THE MINING THUS THE AFS MAY BE MATERIALLY MISSTATED, AS THE
INDUSTRY AUDIT TEAM MIGHT UNINTENTIONALLY NOT COMPLY
WITH THE RULES OR REGULATIONS OF THE INDUSTRY
THERE IS AN EXTREMELY THE FOLLOWING RISKS EXIST:
TIGHT AUDIT DEADLINE THE AFS MAY BE MATERIALLY MISSTATED AS THE
AUDITOR MAY NOT HAVE SUFFICIENT TIME TO
OBTAIN THE NECESSARY AUDIT EVIDENCE,
RESULTING IN MATERIAL MISSTATEMENTS GOING
UNDETECTED
THE AFS MAY BE MATERIALLY MISSTATED DUE TO
ERROR AS THE FINANCIAL RESULTS PREPARED BY
AFRICHIC MIGHT BE INCOMPLETE DUE TO TIME
PRESSURE, THUS NOT HAVING SUFFICIENT TIME TO
IDENTIFY, ACCOUNT FOR AND DISCLOSE
SUBSEQUENT EVENTS
NEW AUDIT CLIENT THE FOLLOWING RISKS EXIST:
THE AFS MAY BE MATERIALLY MISSTATED DUE TO
ERRORS AS THE OPENING BALANCES MAY BE
INCORRECT AS OUR AUDIT FIRM WAS NOT THE
AUDIT FIRM IN THE PRIOR YEAR
THE AFS MAY BE MATERIALLY MISSTATED AS
MISSTATEMENTS COULD GO UNDETECTED AS WE
ARE UNFAMILIAR WITH THE CLIENT
MANAGEMENTS INTEGRITY THE AFS MAY BE MATERIALLY MISSTATED AS THE CONTROL
IS QUESTIONABLE ENVIRONMENT MIGHT BE COMPROMISED BY
MANAGING MANAGEMENT WHO LACK INTEGRITY. THIS COULD LEAD
PARTNER IS THE TO ERRORS AND MISSTATEMENTS DUE TO FRAUD IN THE
