- 20 Marks
AA – L2 – Q42 – Audit Evidence
List and explain factors influencing the auditor's judgment on sufficiency of audit evidence. List substantive audit procedures for trade payables, accruals, and provision for legal action at Regent Co.
Question
ISA 500 Audit Evidence states that the objective of the auditor is to ‘design and perform audit procedures in such a way as to enable the auditor to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the auditor’s opinion’.
Required:
(a) List and explain the factors which will influence the auditor’s judgment concerning the sufficiency of audit evidence obtained.
You are the audit senior in charge of the audit of Regent Co, a company that has been trading for over 50 years. Regent Co manufactures and sells tables and chairs directly to the public. The company’s year-end is 31 March.
Current liabilities are shown on Regent Co’s statement of financial position as follows:
| 20X8 | 20X7 | |
|---|---|---|
| C | C | |
| Trade payables | 884,824 | 816,817 |
| Accruals | 56,903 | 51,551 |
| Provision for legal action | 60,000 | – |
| 1,001,727 | 868,368 |
The provision for legal action relates to a claim from a customer who suffered an injury while assembling a chair supplied by Regent Co. The directors of Regent Co dispute the claim, although they are recommending an out of court settlement to avoid damaging publicity against Regent Co.
Required:
(b) List the substantive audit procedures that you should undertake in the audit of current liabilities of Regent Co for the year ended 31 March 20X8. For each procedure, explain the purpose of that procedure.
marks are allocated as follows:
(i) Trade payables (9 marks)
(ii) Accruals (3 marks)
(iii) The provision for legal action (4 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Audit Evidence, Auditor Judgment, Risk Assessment, Sufficiency of Evidence
- Level: Level 2
- Topic: Audit Evidence
