(a) Quality control, ethical and other professional issues
Generally up to 1 mark for each point explained:
– Materiality should be reviewed as the audit progresses
– Insufficient audit evidence obtained in relation to packing machine:
1 mark for comment on materiality
1 mark for comment on physical verification
1 mark for comment on external confirmation
1 mark for comment on whether the distribution company is a related party
1 mark for comment on assertions/inappropriate audit conclusion
– Lack of organisation at inventory count should have been discussed with management
– Test count discrepancies should be extrapolated over the population
– Audit staff may need training on inventory count attendance
– Misstatements should be accumulated and discussed with management
– The inaccuracy of the client’s test counts should be reported to management as a control deficiency
– Insufficient review performed by audit manager
– Review left too late and should be ongoing during the audit
– Potential self-interest threat regarding audit engagement partner’s brother
– Matter should be investigated and notified to audit firm’s ethical partner
– The audit partner lacks integrity, maybe has something to hide
– The partner may need to be removed from the audit and his work reviewed
Maximum marks 13