Problem 4.

21
(a): Analytical procedures (comparing the data current-year with previous
year).
(b): Inspection of documentation (agree the total of the A.R subsidiary
ledger to that in general ledger).
(c): Enquiries (discuss with the credit manager, who are experienced and
competent).
(d): Physical inspection (perform test counts due to scepticism about the
warehouse personnel’s count).
(e): Physical inspection (examine a new bottling machine).
(f): Observation (watching the client’s warehouse personnel count).
(g): Confirmation (obtaining a letter from the client’s solicitor).
(h): Inspection of documentation (vouching the price in billing program for
pricing sales invoice in client’s approved price list).
(i): Inspection of documentation (examine large sales invoices).
(j): Confirmation (send a written request to the client’s customers for
report).

Problem 12.23
(a): Because Helping Hand Ltd has not been verifying vouchers or receipts,
hence it exists a scope limitation on the audit. Besides, 65% of all the company
expenses does not have documents, it is likely to have pervasive effect.
Consequently, the most likely auditor’s opinion is disclaimer.
(b): Because there is a material misstatement that the allocation of costs to
houses and units sold is not adequate, the auditor’s opinion is narrowed down to
qualified or adverse.
Situation 1: If the misstatement is considered pervasive, the auditor’s
opinion is adverse.
Situation 2: If the misstatement is considered not pervasive, the auditor’s
opinion is qualified.
 (c): Big Event Ltd does not have the income, cash or other assets to sustain
such a loss incurred due to the fall of Australian dollar against the US dollar, thus it
violates the going-concern assumption. Since the auditor has sufficient evidences
and does not detect any material misstatement, his or her opinion in this situation is
unqualified with emphasis of matter, which is substantial doubt on going-
concern assumption.