- 20 Marks
AA – May 2021 – L2 – Q2 – Risk Assessment and Internal Control
Analysis of substantive procedures, risk assessment purposes, and categories of audit assertions.
Question
Your partner invited you and other colleagues to a pre-audit meeting and informed you that the audit of Why Worry Agro Chemical Company Limited will soon commence. He stated that based on experience, the internal control system is not reliable. Therefore, it will be a transaction-based audit approach involving a high level of substantive testing.
He further informed the engagement team that arrangements will be made for a brainstorming session on risk assessment and how to address the risk, using relevant audit assertions. The internal specialists on information technology and tax were invited to the meeting, and two new audit trainees were attached to you on the audit.
As the proposed audit senior personnel on the audit team:
You are required to explain:
a. Substantive audit procedures (2 Marks)
b. Purpose of risk assessment (6 Marks)
c. Categories of financial statements audit assertions (6 Marks)
d. Examples of substantive testing (6 Marks)
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