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Time: 3 Hours
Question 1 Select the best answer for each of the following unrelated items. Answer each of these items in your examination booklet by giving the number of your choice. For example, if the best answer for item (a) is (1), write (a)(1) in your examination booklet. If more than one answer is given for an item, that item will not be marked. Incorrect answers will be marked as zero. Marks will not be awarded for explanations. Note:
2 marks each


Which of the following best describes the professional skepticism required by an auditor? 1) An attitude that includes a questioning mind, being alert to conditions that may indicate possible misstatement due to error or fraud, and a critical assessment of audit evidence. 2) An attitude that assumes management is always correct in their representations, unless there is fraud involved. 3) An attitude that assumes that management is always biased in their representations. 4) An attitude that recognizes that the financial statements will contain some misstatements due to error or fraud, once the audit is completed.

b. Which of the following would require a reference to consistency in the audit report? 1) 2) 3) 4) c. Changes in accounting estimates Changes in classification of financial statement amounts Changes in the format of the statement of cash flows Error corrections involving a change in accounting principles

Which of the following is true concerning the Sarbanes-Oxley Act of the USA? 1) 2) 3) 4) It applies to all companies in Canada as well as the USA. It applies to Canadian companies listed on U.S. stock exchanges. It provides increased protection from legal liability for auditors. It requires all public companies in the USA and their Canadian subsidiaries to be self-regulating in terms of GAAP.

d. How does an audit affect risk for clients and the users of financial statements? 1) 2) 3) 4) e. Audited financial statements reduce a clients business risk. Audited financial statements reduce information risk. Audited financial statements reduce the control risk in the clients accounting records. Audited financial statements reduce the inherent risk in the clients accounting records.

Francois, a CGA, has agreed to a compilation engagement for a client and is preparing the financial statements based on the clients information. If Francois feels that the financial statements will be misleading based on information provided by the client, how should he proceed? 1) Francois should not be concerned about whether the financial statements are misleading, since this is only a compilation engagement. 2) Francois should correct the financial statements even if the client does not agree to the necessary changes. 3) Francois should issue an adverse opinion. 4) Francois should resign from the engagement. Continued...


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On February 10, 2011, Dimitri & Partners, CGAs, was appointed to audit the financial statements of Baltic Corporation for the 2010 year. The company was not audited previously and the auditors were concerned with the accuracy of the inventory. Although they were not able to satisfy themselves as to the accuracy of the ending inventory, the auditors were able to establish that the possible misstatement of the inventory account and related accounts would not exceed $300,000, which was material but not pervasively material. Since the auditors could not conclusively establish the exact amount of misstatement, the client refused to adjust the financial statements. Which audit opinion would be appropriate? 1) 2) 3) 4) Disclaimer (only) Adverse (only) Qualified Unqualified

g. Xiu is a CGA and a senior auditor for Nam & Partners, CGAs. Nam is conducting an external audit of Rec Inc. The audit is taking longer than expected as supporting documents are not made available to the audit team in a timely manner, and Xiu has found errors when testing the internal controls, which were known to management but not disclosed to the auditors prior to the test. How would this situation affect the auditors risk assessments? 1) 2) 3) 4) The assessed level of control risk should be decreased. The assessed level of audit risk should be decreased. The assessed level of inherent risk and control risk should be increased. The assessed level of detection risk should be increased.

h. Identified misstatements (IM) = $60,000; likely aggregate misstatement (LAM) = $120,000; materiality = $140,000; and further possible misstatement (FPM) = $16,000. How should the auditor proceed? 1) The auditor cannot issue an unqualified opinion unless the client adjusts the statements by $10,000. 2) The auditor cannot issue an unqualified opinion unless the client adjusts the statements by $15,000. 3) The auditor cannot issue an unqualified opinion unless the client adjusts the statements by $16,000. 4) The auditor can issue an unqualified opinion without any adjustment made by the client. i. Which of the following would increase the auditors business risk when auditing financial statements? 1) The auditor issued an unqualified opinion and failed to detect a material misstatement in the financial statements, but the auditor was not negligent. 2) The clients business risk decreased due to unforeseen reasons. 3) The auditor set the audit risk high. 4) The auditor reduced sample sizes in order to reduce the cost of completing the audit. j. Which of the following best describes the relationship between IR, CR, and DR? 1) 2) 3) 4) DR does not vary from one assertion to another. IR, CR, and DR vary from assertion to assertion. IR and CR do not vary from assertion to assertion, but DR does vary from assertion to assertion. When IR increases, DR decreases.



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k. Which of the following is a likely result when a company institutes electronic data interchange (EDI) in its purchasing function? 1) 2) 3) 4) l. The company may be required to enter into a trading partner agreement (TPA). The auditor will no longer be able to audit the transactions in the purchasing function. EDI will mean that internal controls are no longer needed for the purchasing function. Control risk will have to be assessed as high for the purchasing function.

Which of the following best describes an enterprise resource planning system? 1) 2) 3) 4) A method of audit planning that focuses mainly on business risks of the enterprise being audited. A method of audit planning that focuses on resources used when conducting an audit. An information system that integrates enterprise-wide resource and accounting information. An information system used to reduce costs of an audit by focusing the resources of the enterprise being audited.

m. When would manual controls likely be more effective than computer-based controls? 1) 2) 3) 4) When there is a high volume of similar transactions When there are large or unusual transactions When monitoring the effectiveness of automated controls When errors are difficult to define or anticipate

n. What is the purpose of double dating the audit report? 1) To provide information about an event that happened after year end but before the audit report date 2) To provide information about an event that is interesting but happened after the audit work was completed 3) To provide information that existed before year end but the auditor had not learned about until after the audit report date 4) To indicate that the auditor takes responsibility for discovering subsequent events only up to the audit report date, except for a specified subsequent event o. Which of the following best describes a Type II subsequent event? 1) An event whose cause occurs after year end and must be adjusted for in the financial statements 2) An event that confirms a pre-existing condition at the balance sheet date and must be adjusted for in the financial statements 3) An event that occurs after year end, and for which disclosure in the notes to the financial statements is appropriate and no adjustments to the financial statement are necessary 4) An event that confirms a pre-existing condition at the balance sheet date and for which disclosure in the notes to the financial statements is appropriate and no adjustments to the financial statement are necessary


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Question 2 Karl is a CGA supervising two accounting students, James and Robert, on an audit of a companys financial statements. Karl had been involved in the audit of this company for the past two years and based on his previous findings, he did not expect any misstatements in the shipping expense. Karl had told the students that the maximum sample deviation rate that could be accepted would be 1%, and asked them to determine the minimum sample size needed for a test of controls. Using a table from his auditing course, based on an expected population deviation rate (EPDR) of 0%, James determined that the minimum sample size needed would be 70 invoices. Robert disagreed, and pointed out that the EPDR had to be the same as the tolerable deviation rate when determining sample size. Using an EPDR of 1%, Robert then determined that the minimum sample size should be 100. Required 3 4 a. Explain whether you agree with Robert that the sample size should be 100. b. Explain whether you agree that at least one of the students made a sampling error. Question 3 During the audit of Xtra Technology Inc. (XTI), Andrea found the following journal entry occurring at the end of each month: Inventory ..................................................................................................................... Cost variance ........................................................................................................ 20,000 20,000

The accounting manager told Andrea that this was a regular entry made every month to account for the deviation from actual cost to standard costing for inventory. Andrea was skeptical of this explanation as it was the same amount each month, and there were other journal entries that appeared to deal with the cost variances adequately, so she asked for the supporting documents for the entries. The accounting manager told her that there were no supporting documents as this was an automatic entry made every month, authorized by the controller. He had never considered checking on it before. When Andrea asked the controller about the entries, she discovered that the company purchased inventory from a company controlled by the same company that owned a controlling interest in XTI. The $20,000 was actually a purchase, but they preferred to record it as a cost variance. The controller told Andrea not to be concerned about it and that the parent companys auditors would take care of all transactions between the two companies in its consolidated accounting. Required Assume that you are a manager with the audit firm and Andrea reports to you. Explain your concerns, if any, over the information that Andrea has just learned. Support your answer with at least four points. 8 Question 4 Li was assigned to work on the audit of A1 Clothing Ltd. because she has been auditing similar companies for 3 years and is considered to be knowledgeable about the clothing retailing industry in Canada. Her employer, Bing, CGAs, audited A1 in 2009 for the first time and had difficulty verifying the opening inventory number. This year, in 2010, however, Li has the audited ending balance from 2009 so she does not expect any problems with the inventory account. However, while doing the preliminary work for the audit, she calculated the gross profit margin and was surprised by her findings. Li thinks the gross margin may indicate that the ending inventory for 2010 may be incorrect. 2009 Sales of clothing Cost of goods sold Inventory Required Explain whether you agree with Li. Support your answer with at least three points. $ 10,000,000 7,000,000 1,800,000 2010 $ 9,000,000 5,500,000 6,200,000


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Question 5 Parts Inc. sells electrical components to large department stores and also has a few cash sales to electricians. Sales invoices are prepared for all sales. Cash sales are recorded to the cash receipts journal and cash is deposited to the bank each day. All sales to large stores are credit sales and are handled by sales clerks by telephone or fax. The sales clerk takes the customers request, checks the authorized customer list for credit limits (if it is a credit sale), prepares the sales invoice, and sends one copy to the inventory control department, who sends the ordered goods to the shipping department. For cash sales, the inventory control clerk brings the items sold to the sales counter and the goods are given to the purchaser at the time of sale. For credit sales, the shipping clerk signs the inventory control copy of the sales invoice and then prepares a shipping invoice. A third copy of the sales invoice is forwarded to the accounting department so that a clerk can enter the sale into the sales journal. The shipping invoices are maintained in the shipping department in case a shipment needs to be checked. All goods are shipped FOB shipping point. Required 6 a. Design two audit procedures, in addition to sample selection, that will provide evidence of the validity of sales. Identify the procedure (trace, compare, vouch, and so on), the documents you are using, and explain why these procedures will show whether recorded sales are valid.

b. Design two audit procedures that will provide evidence of the completeness of sales. Identify the procedure (trace, compare, vouch, and so on), the documents you are using, and explain why these procedures will show whether recorded sales are complete. Question 6 Moot & Ip, CGAs, took over the audit of Smith Manufacturing Inc. (SMI) last year in 2009. SMI had changed auditors in 2009 to save costs and were very happy with the unqualified audit opinion received on the 2009 financial statements. Jim is a partner at the audit firm and is the partner responsible for the audit, but is planning to retire in May 2011. His daughter Jane is also a CGA and works at the audit firm. In March 2010, the president of SMI offered Jim a position as controller. Jim explained to the client that he could not accept any employment until after the audit was completed, otherwise there would be an ethical problem. Jim also prepared a grant request for SMI in January 2010, to apply for a government grant for research that SMI had done. Jim did not expect any problems in the audit, but he was worried that the audit risk might be high therefore the audit firm might get sued later on. He therefore assessed control risk and inherent risk as low, and set these at 0.01. Because he is very confident of his auditing skills, he also set the detection risk at 0.01. When Jim put these numbers into the audit risk formula, he calculated that the audit would only have an audit risk of 1%, which was good since this would be his last audit and he was hoping the audit risk would be low. In June 2011, after the audit was completed, Jim accepted the position as controller for SMI. SMI paid Jim a large bonus on the day he was hired. Required


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Discuss four ethical issues faced by Jim in the above situation.

b. Explain whether you agree with the way that Jim applied the audit risk model. Explain your answer with at least three points.


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Question 7 Judy is a CGA with a medium-sized CGA firm. The firm conducted an audit of a company that supplied products for satellite tracking devices to various countries. The company has many suppliers and maintains an inventory of hundreds of parts needed for the construction of the devices. The audit firm familiarized itself with the industry, the companys financial structure, and the major shareholders. The firm then obtained confirmation from both the client and the clients legal representatives that the company was not currently involved in any illegal activities, nor had it been in the past. The auditors also did a thorough investigation of internal controls and set detection risk as low. The audit was conducted, and an unqualified opinion issued. Subsequently, it was discovered that the treasurer had committed the crime of forgery, by preparing a false invoice and signing the purchasing managers name to the invoice, thus making a payment for goods that were never received. Another employee in the IT department ran a special program to separate the invoice into 3 individual billings and to print 3 cheques, which were paid to a third party, but which were recorded in the accounting records as having been paid to normal vendors of the company. The third party then shared the money with the 2 employees. The total amount was material, but each cheque by itself was not material. When the fraud was discovered, the company sued the auditor for negligence. Required 9 a. Explain whether you agree that issuing an unqualified opinion in this situation means it is likely that the auditor was negligent. Explain your answer with at least four points.

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b. If the auditor had discovered the fraud during the audit, indicate who the auditor should have advised. Question 8 At Feng Vacations Inc., matters such as purchasing, finance, advertising, and hiring are handled by head office, with a separate department manager assigned to each of these functions. There are 6 locations in Toronto and 3 in Montreal, each supervised by an office manager, who is responsible for ensuring that everyone follows company policies and for scheduling staff as needed. Each location has at least 3 sales clerks who sell vacations to individuals and corporate clients. Sales to individuals equal approximately 60% of the companys revenues and are all paid in full at the time of sale by cash or credit card. Corporate clients are set up as authorized customers, each with a credit limit, which is established by head office. Customers may not exceed their credit limit without the head office finance managers permission. Last year, a manager at one of the Montreal locations allowed a corporate customer to exceed the authorized credit limit in order to make a large sale, and it resulted in an uncollectible account. The manager was trying to increase sales (and his bonus) and was fired. Another employee, a newly-hired sales clerk, was fired for selling a travel vacation to a friend for a discounted price (the price that employees of Feng would pay for their own travel). All new employees receive 3 weeks of closely-supervised training before they are allowed to sell vacations to the public. Required Determine if the control environment of Feng Vacations Inc. is strong or weak. Support your determination with four points.




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Before starting to write the examination, make sure that it is complete and that there are no printing defects. This examination consists of 6 pages. There are 8 questions for a total of 100 marks.


To assist you in answering the examination questions, CGA-Canada includes the following glossary of terms. Glossary of Assessment Terms Adapted from David Palmer, Study Guide: Developing Effective Study Methods (Vancouver: CGA-Canada, 1996). Copyright David Palmer.
Calculate Mathematically determine the amount or number, showing formulas used and steps taken. (Also Compute). Examine qualities or characteristics that resemble each other. Emphasize similarities, although differences may be mentioned. Compare by observing differences. Stress the dissimilarities of qualities or characteristics. (Also Distinguish between) Express your own judgment concerning the topic or viewpoint in question. Discuss both pros and cons. Clearly state the meaning of the word or term. Relate the meaning specifically to the way it is used in the subject area under discussion. Perhaps also show how the item defined differs from items in other classes. Provide detail on the relevant characteristics, qualities, or events. Create an outcome (e.g., a plan or program) that incorporates the relevant issues and information. Calculate or formulate a response that considers the relevant qualitative and quantitative factors. Give a drawing, chart, plan or graphic answer. Usually you should label a diagram. In some cases, add a brief explanation or description. (Also Draw) This calls for the most complete and detailed answer. Examine and analyze carefully and present both pros and cons. To discuss briefly requires you to state in a few sentences the critical factors. This requires making an informed judgment. Your judgment must be shown to be based on knowledge and information about the subject. (Just stating your own ideas is not sufficient.) Cite authorities. Cite advantages and limitations. In explanatory answers you must clarify the cause(s), or reasons(s). State the how and why of the subject. Give reasons for differences of opinions or of results. To explain briefly requires you to state the reasons simply, in a few words. Identify Distinguish and specify the important issues, factors, or items, usually based on an evaluation or analysis of a scenario. Illustrate Make clear by giving an example, e.g., a figure, diagram or concrete example. Interpret Translate, give examples of, solve, or comment on a subject, usually making a judgment on it. Justify Prove or give reasons for decisions or conclusions. List Present an itemized series or tabulation. Be concise. Point form is often acceptable. Outline This is an organized description. Give a general overview, stating main and supporting ideas. Use headings and sub-headings, usually in point form. Omit minor details. Prove Establish that something is true by citing evidence or giving clear logical reasons. Recommend Propose an appropriate solution or course of action based on an evaluation or analysis of a scenario. Relate Show how things are connected with each other or how one causes another, correlates with another, or is like another. Review Examine a subject critically, analyzing and commenting on the important statements to be made about it. State Clearly provide a position based on an evaluation, e.g., Agree/Disagree, Correct/Incorrect, Yes/No. (Also Indicate) Summarize Give the main points or facts in condensed form, like the summary of a chapter, omitting details and illustrations. Trace In narrative form, describe progress, development, or historical events from some point of origin. Explain





Describe Design





30 Question 1 Note:
2 marks each

Time: 3 Hours

Sources: a. 1) Topic 1.1 (Level 1)

b. 4) Topic1.9 (Level 1) c. 2) Topic1.1 (Level 1)

d. 2) Topic1.1 (Level 1) e. f. 4) Topic1.7 (Level 1) 3) Topic1.9 (Level 1)

g. 3) Topic 3.1 (Level 2) h. 4) Topic 4.5 (Level 1) i. j. 1) Topic 4.6 (Level 1) 2) Topic 4.7 (Level 1)

k. 1) Topic 7.2 (Level 2) l. 3) Topic 7.1 (Level 1)

m. 2) Topic 7.1 (Level 1) n. 4) Topic 10.9 (Level 2) o. 3) Topic 10.9 (Level 2)


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Question 2 a. Source: Topic 6.5 (Level 2) Disagree with Robert. EPDR does not have to be equal to TDR. The auditor does not expect any misstatements in the account, therefore the EPDR would be 0%. Note:
1 mark for disagree; 1 mark for identifying that James is correct; 1 mark for correctly interpreting the data to determine the EPDR.

b. Source: Topic 6.5 (Level 2) Disagree. James answer was correct. Roberts answer was a result of non-sampling risk, because he misapplied the sampling method. Note:
1 mark for disagree; 1 mark for non-sampling risk; 2 marks for explanation.

Question 3 Source: Topic 10.8 (Level 1)

This is a related-party transaction that the auditor did not know about. Related parties and related-party transactions should have been identified to the audit firm at the start of the audit. Either the audit partner failed in her procedures, or the management did not disclose this information. If management did not disclose this information, the auditor should be skeptical of managements integrity. If the audit manager did ask management about the related parties at the start of the audit, the auditor must advise the audit committee of the failure of management to disclose the related party and transactions. The auditor has to conduct audit procedures to confirm the nature and amount of the transactions. The auditor has to ensure proper disclosure is made in the financial statements of the related-party transactions. The auditor has to ensure proper recognition of purchases in the financial statements. Recording the amount as a variance does not provide proper recognition.

2 marks per bullet to a maximum of 8 marks

Question 4 Source: Topic 9.1 (Level 1)

Agree with Li that the gross margin indicates an error in 2010 ending inventory. Sales have decreased yet the margin has increased. This could be due to cost reductions, but purchases appear to exceed sales (based on the ending inventory), which would be very unexpected. Most likely the ending inventory for 2010 is overstated (based on the increase in inventory and the likely error in purchases).

2 marks for agree and 2 marks per bullet to a maximum of 6 marks


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Question 5 Source: Topic 8.3 (Level 1) 6 a.

Select a sample of sales from the sales journal and vouch to the sales invoice and then to the shipping document. Any credit sale not shipped is not a valid sale. Trace cash sale invoices to cash receipts journal or bank deposit. Any sale recorded as a cash sale but not paid for would likely not be a valid sale.

3 marks per bullet to a maximum of 6 marks


Select a sample of shipping invoices and trace to sales invoice and then to sales journal, to find any sales shipped but not recorded in the sales journal. Trace cash deposits for last week before year end to sales journal to find unrecorded sales.

3 marks per bullet to a maximum of 6 marks

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Question 6 a. Source: Topic 2.3 (Level 1)

Preparing the grant application is not an ethical violation. It does not conflict with the audit conducted by his employer or his audit duties. Preparing the financial statements after he retires would create an ethical violation for future audits as Jims daughter works for the audit firm. Agreeing to accept future employment before the conclusion of the 2010 audit would be a violation of CEPROC Rule 202: Independence. Jim would not be independent in mind nor in appearance. Unless the large bonus was linked to the results of the audit, it would not present an ethical violation.

21/2 marks per bullet to a maximum of 10 marks (identifying Rule 202 is not required)

b. Source: Topic 4.7 (Level 1)

Jim applied the audit risk model incorrectly and has confused business risk with audit risk. Auditors determine an acceptable value for AR, insert the values assessed for IR and CR, and then use the formula to determine DR, which determines the amount of testing to be done. Jim determined DR and just accepted whatever audit risk number the formula calculated. Auditors set CR value and IR value inappropriately, therefore the AR model will not have meaningful results.

2 marks for each bullet to a maximum of 6 marks


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Question 7 a. Source: Topic 3.1 (Level 2)

Disagree An audit only provides reasonable assurance, not absolute assurance. Auditors cannot be expected to act as criminal investigators. All internal control procedures have inherent limitations. Much of the evidence obtained by the auditors is persuasive, but not conclusive in nature. This illegal act involved both collusion and forgery, both of which are designed to avoid detection. The auditor undertook reasonable steps to be aware of any irregularities or legal problems. The auditor made a thorough investigation of the internal controls. There were only three fraudulent transactions, none of which was material. The payees name was altered so that the accounting records themselves would not show any unusual items.

Any reasonable points in support of an Agree will also be awarded marks; 1 mark for disagree; 2 marks per bullet to a maximum of 9 marks.

b. Source: Topic 3.1 (Level 2) The auditor must inform the audit committee. Note:
Board of directors is also acceptable.

Question 8 Source: Topic 5.3 (Level 1) The following points suggest that the control environment is strong:

Communication and enforcement of integrity and ethical values: An employee was fired for giving an unauthorized discount to a friend, showing that unethical behaviour would not be tolerated. Commitment to competence: New employees receive extensive training and should therefore be competent. Managements philosophy and operating style: A manager was fired last year for not following company policy. Assignment of authority and responsibility: There is a clear assignment of authority between the head office, the store managers, and the staff, indicating effective segregation of duties.

The following points suggest that the control environment needs to be strengthened:

The fact that the Montreal manager allowed a customer to exceed its authorized credit limit shows that the controls over granting credit need to be strengthened. The fact that a newly-hired employee sold a vacation at an unauthorized discount shows that the controls over sales discounts needs to be strengthened.

1 mark for indicating that the control environment is strong; 2 marks per bullet to a maximum of 9 marks.



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General Comments
The overall performance of the students on this examination was very good. Students demonstrated a good awareness of the purpose of an external audit, different audit opinions, materiality, the effects of computerization of accounting systems, the implications of related party transactions, analytical reviews, ethics, and internal control. Some students did not obtain full marks because they did not read the question carefully, overlooked important facts in the given information, did not address the required in their answers, or provided answers that were too brief, stating only conclusions without an explanation.

Specific Comments
Question 1 Multiple choice (Levels 1 and 2) This question was answered satisfactorily. Several students chose an incorrect option on parts (b), (i), (j), (k), and (n). Each of these questions was taken from the module notes and/or the text, and were not intended to be difficult, although they required a careful review of each of the options to choose the best answer. The multiple-choice questions are designed to present not only the best answer, but also three other options that require careful consideration before being eliminated in the decision process. Every option should be considered, as the incorrect options have been designed to appear somewhat reasonable. Other than these questions, students performed very well on the multiple-choice questions. Question 2 Professional standards and sampling and non-sampling error (Level 2) a. Part (a) was difficult for several students who did not distinguish between EPDR and the TDR in sample selection. The interaction between these concepts is important in determining sample size and students should review this material in the course. b. Part (b) was not answered satisfactorily by many students. The question required specific knowledge of the difference between sampling and non-sampling error, which continues to be a weak area for some students. Students tended to either know the topic very well and receive full marks, or not know the topic at all. Question 3 Related parties (Level 1) Question 3 was answered very well, with most students obtaining full marks. Question 4 Inventory and analytical procedures (Level 1) Question 4 was answered very well. Students demonstrated a good understanding of analytical procedures, with almost all student students obtaining either full marks or high part marks. Question 5 Test of controls procedures for the revenue and collection cycle (Level 1) Parts (a) and (b) were answered very well by many students and satisfactorily overall. Some students, however, were unable to prepare adequate audit procedures as required. Students who had difficulty tended to either not answer the required (for example, designing an audit procedure related to the objective of authorization instead of validity or completeness), or to not design their tests in a specific direction (either starting at the source documents and ending with the G/L, or vice-versa). Many answers did not address the general ledger at all, or confused the accounts receivable balance with the sales account. In this way, the technique of confirmation of accounts receivable would not be a test of sales. Audit procedures are covered multiple times in the course material, in both the text and in the module notes, and as an integral part of the course are likely to appear on an examination. Being able to design an audit procedure for each objective should be an important part of a students examination preparation. Continued...
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Question 6 Ethics and audit risk formula (Level 1) a. Part (a) was answered well with almost all students obtaining high part marks, and some obtaining full marks. The question dealt with ethics. Students were able to identify the situations involving ethics but some students provided answers that were too brief to obtain full marks. Simply stating that accepting the offer of an employment position would obtain only part marks explaining why this was an ethics issue would obtain full marks. b. Part (b) was answered very well, with almost all students obtaining full or high part marks, with no problems noted. Question 7 Auditors responsibility to consider fraud and error (Level 2) a. Part (a) was answered well, with many students obtaining either full marks or high part marks. Some students however simply discussed negligence in a general way, with little reference to the actual facts of the question (that is, they did not apply the concepts to the given fact situation). Always explain your answers by showing how the concepts you are discussing relate to the given facts in the question. b. Part (b) was answered very well, with no problems noted. Question 8 Control environment (Level 1) Question 8 was answered well by almost all students. Control environments frequently have both strengths and weaknesses and students were able to identify these with little difficulty.


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