AUE 2601 ASSIGNMENT 2
GROUP C SUGGESTED
SOLUTION
Semester 1 2024
UNISA
AUE 2601
, QUESTION 1
N.B. Instructions to the student:
▪ Please edit and paraphrase the solutions provided in this assignment to avoid the risk of
“PLAGIARISM”.
▪ For any help regarding to other modules, tutorial classes, & exam preparation, contact us
at: 068 502 6473/Visit our website at: www.gradquest.co.za.
1. With reference to the background information:
1.1. List the different parties involved in the audit engagement of Green Forever.
ANSWER:
The parties involved in the audit of Green Forever are:
▪ The audit firm: Auditors One (“AO”)
▪ The audit client (directors of Green Forever (Pty) Ltd)
▪ The owners of Green Forever (Pty) Ltd
1.2. Explain the differences between a reasonable assurance engagement and a limited
assurance engagement.
ANSWER:
▪ On the one hand, reasonable assurance engagement:
o One which can only be given when the practitioner has gathered sufficient
appropriate evidence to satisfy himself that the risk that he expresses an inappropriate
opinion on the subject matter is acceptably low.
o In the context of an audit of financial statements this means that the auditor carries
out comprehensive procedures to gather evidence so that he can express an opinion,
that the financial statements are fairly presented (not materially misstated) in a
positive form.
▪ On the other hand, limited assurance engagement
o is one whereby the level of assurance is lower than reasonable assurance but which is
still meaningful to users.
o It has also described as moderate assurance given when the practitioner has gathered
enough evidence to satisfy himself that the risk that he expresses an inappropriate
conclusion on the subject matter is greater than for a reasonable assurance
engagement, but still at an acceptably low level for the particular engagement.
1.3. Explain how the agency theory and the stakeholder theory contributed to the necessity of an
audit of financial statements.
ANSWER:
▪ The agency theory: It allows for the delegation of authority between the principal and the
agent to perform or act towards the principal’s request. The principal in this case refers to
the audit client; and the agent herein refers to the auditor in question assigned to perform
an audit on request by the audit client.
▪ The stakeholder theory: To ensure stakeholder inclusivity with respect to the corporate
reporting generated by business entities such that a holistic account on the triple context
(economic, social, and environmental performance) of the organization is appropriately
accounted for.
GROUP C SUGGESTED
SOLUTION
Semester 1 2024
UNISA
AUE 2601
, QUESTION 1
N.B. Instructions to the student:
▪ Please edit and paraphrase the solutions provided in this assignment to avoid the risk of
“PLAGIARISM”.
▪ For any help regarding to other modules, tutorial classes, & exam preparation, contact us
at: 068 502 6473/Visit our website at: www.gradquest.co.za.
1. With reference to the background information:
1.1. List the different parties involved in the audit engagement of Green Forever.
ANSWER:
The parties involved in the audit of Green Forever are:
▪ The audit firm: Auditors One (“AO”)
▪ The audit client (directors of Green Forever (Pty) Ltd)
▪ The owners of Green Forever (Pty) Ltd
1.2. Explain the differences between a reasonable assurance engagement and a limited
assurance engagement.
ANSWER:
▪ On the one hand, reasonable assurance engagement:
o One which can only be given when the practitioner has gathered sufficient
appropriate evidence to satisfy himself that the risk that he expresses an inappropriate
opinion on the subject matter is acceptably low.
o In the context of an audit of financial statements this means that the auditor carries
out comprehensive procedures to gather evidence so that he can express an opinion,
that the financial statements are fairly presented (not materially misstated) in a
positive form.
▪ On the other hand, limited assurance engagement
o is one whereby the level of assurance is lower than reasonable assurance but which is
still meaningful to users.
o It has also described as moderate assurance given when the practitioner has gathered
enough evidence to satisfy himself that the risk that he expresses an inappropriate
conclusion on the subject matter is greater than for a reasonable assurance
engagement, but still at an acceptably low level for the particular engagement.
1.3. Explain how the agency theory and the stakeholder theory contributed to the necessity of an
audit of financial statements.
ANSWER:
▪ The agency theory: It allows for the delegation of authority between the principal and the
agent to perform or act towards the principal’s request. The principal in this case refers to
the audit client; and the agent herein refers to the auditor in question assigned to perform
an audit on request by the audit client.
▪ The stakeholder theory: To ensure stakeholder inclusivity with respect to the corporate
reporting generated by business entities such that a holistic account on the triple context
(economic, social, and environmental performance) of the organization is appropriately
accounted for.
