Question 1: What is a statutory audit?

Answer: A statutory audit is an audit that is required by law. It is conducted to

ensure that a company’s financial statements provide a true and fair view of its
financial position and performance.

Question 6: What is materiality in the context of a statutory audit?

Answer: Materiality is the concept of assessing whether a particular item or error

in a company’s financial statements is significant enough to impact the overall
view of the financial statements.

Question 7: What is an audit trail?

Answer: An audit trail is a record of all the steps taken during an audit, including
the evidence gathered, the tests performed, and the conclusions reached.

Question 10: What are some common challenges faced by auditors during a
statutory audit?

Answer: Common challenges faced by auditors during a statutory audit include

lack of cooperation from the company’s management, incomplete or inaccurate
records, and difficulty in assessing the reliability of the company’s information
systems.

Audit Opinion - The audit opinion refers to the statement issued by an

auditor expressing the examination results on their clients’ financial
statements. It lets an organization’s stakeholders determine whether
their financial statements are correct or wrong.

1) Unmodified Opinion:

The modified opinion is formed when the company’s financial

statements are prepared according to accounting standards and are in
all material respect

2) Qualified Opinion:

The qualified opinion is an opinion formed after testing and

confirming that there are material misstatements in the entity’s books
of account. In the auditor’s opinion to be qualified, the identified
misstatements must not be pervasive (Payne & Williamson, 2021). In
this case, pervasive misstatements are a bit subjective depending on
the judgment issued by the auditor.

3) Adverse Opinion:

This is a negative opinion formed by an auditor on the company’s

financial records. For auditors to form this type of opinion, they must
have examined and identified a material misstatement in the financial
records (Berglund, 2020).

The financial statements are therefore considered to be pervasive. An

adverse opinion is more serious as compared to a qualified opinion
(Berglund, 2020). It is an important opinion to users of financial
statements because it influences their decisions regarding the
business entity.

4) Disclaimer Of Opinion:

This is a condition opinion that is formed by the auditors after

examining the entity’s books of account. It is usually different from
adverse and qualified opinions. In this opinion, auditors issue an
opinion because they could not gather enough evidence on material
items.

Disclaimer opinion arises when the auditors could complete their

testing due to inefficient evidence (Payne & Williamson, 2021).
Auditors believe that the things they could not access could have
material information that would affect their opinion.

Walkthrough - A walkthrough test is an auditing technique that

examines a process from initiation to completion. The purpose is to
observe the effective implementation of internal controls devised by
an organization. A walkthrough test’s prime objective is to
determine a system’s reliability and the controls put in place
to run that system. The results should help the management
to identify the issues and weaknesses found in the system.