AUD589

ANSWERS FOR TUTORIAL 1

WEEK 5 – AUDIT PLANNING

Answer ALL questions and submit by Friday of the week.

1. Explain the benefits of audit planning.
- To conduct audit in an efficient and timely manner
- To obtain sufficient & appropriate evidence
- To ensure adequate attention is paid to the critical aspects of the audit
- To help keep audit costs at reasonable minimum level
- To minimise legal liability
- To help avoid misunderstanding with the client
(3 marks)
2. Discuss the four (4) phases of audit process.
Phase 1 – Planning (plan and design an audit approach)
Phase 2 – Reviewing systems of accounting & related internal controls & obtaining audit evidence
(Perform test of controls and substantive tests of transactions)
Phase 3 – Obtaining audit evidence and reviewing financial statements (perform analytical procedures
& test of detail balances)
Phase 4 – Reporting findings (Complete the audit and issue an audit report)
(8 marks)
(TOTAL: 11 marks)

AUD589
TUTORIAL 2
WEEK 5 – AUDIT PLANNING

Answer ALL questions and submit by Friday of the week.

1. What are the objectives of internal control?
Auditor should understand the accounting system and related internal controls and evaluate the
operation of those internal controls upon which he relies in determining the nature, timing and extent of
other audit procedures.
(3 marks)
2. Why does management establish Internal Control System?
a. To carry on the business of the enterprise in an orderly and efficient manner
b. To ensure adherence to management policies
c. To safeguard the assets
d. To prevent and detect fraud and errors
e. To ensure completeness and accuracy of the records for the timely preparation of reliable
financial statements

(4 marks)
 3. Give four inherent limitations of internal control.
- Human error due to inefficiency, careless, fatigue, misunderstanding the instruction, negligence
- Management may override the control set up by them
- Cost constraint involved – cost control against cost benefits
- The internal control procedures may become inadequate due to changes in company size and
activities
- Lack of personal quality of employee – abuse of power, Collusion

(4 marks)
(TOTAL: 11 marks)

AUD589
TUTORIAL 3
WEEK 5 – AUDIT PLANNING

Answer ALL questions and submit by Friday of the week.

1. Why do auditors use samples in carrying out their audit procedures?
-Auditor use audit sampling to enable the auditor to obtain and evaluate evidence of some
characteristics of the selected items in order to assist in forming a conclusion of the testing population.
(3 marks)
2. What are the distinction between statistical and non-statistical sampling?
Statistical sampling – approach that has the following characteristics, random selection of a sample, use
of probability theory to evaluate sample results including the measurement of sampling risk

Non statistical sampling – the auditor must rely on professional judgment rather than laws of probability/
statistical theory to measure sampling risk and to reach conclusion about the audit test.

(4 marks)
3. List and explain the three (3) types of statistical sampling techniques.
1. Attribute sampling – estimate proportion that possess a specified characteristic. Use for test of
controls.
2. Monetary sampling – uses attribute sampling theory and technique to estimate the amount of
misstatement for a class of transactions or an account balance.
3. Classical Variables sampling – estimate the amount for a class of transactions or account balances

** monetary – unit sampling a classical variables sampling are frequently used to substantive tests
of transaction and account balances.

(6 marks)
(TOTAL: 17 marks)