(a) Generally 1 mark available for each well explained point:
(i) Audit v limited review
– Regulatory requirements
– Determination of scope
– Nature of procedures
– Reasonable v moderate levels of assurance
– Audit opinion
‘The financial statements are true and fair…….’
– Review engagement conclusion
‘Based on our review nothing has coming to our attention…….’
– Negative v positive wording
Maximum marks 4
(ii) Advantages and disadvantages of audit
– Accountability to external shareholder
– Renegotiation of loan facility
– Reliability of information for internal decisions
– Potential mandatory audit if company grows
– Overseas trading relationships
– Review of internal controls
– Risk of misstatement due to changes in accounting staff
– Cost of full audit
– Potentially no need for high level of assurance
– More invasive nature of audit
Maximum marks 8