( a ) First of wholly, the difference between internal and external hearer is that the internal hearer is a portion of organisation while external hearer is engaged by it but non a portion of organisation. The internal hearer ‘s aims are decided by the board, direction and professional criterions. It serves the organisation by assisting it carry through its aims, and bettering operations, hazard direction, internal controls, and administration procedures. Their precedences are the board and direction. Their range of work is besides comprehensive. Other than that, they are besides responsible to forestall any signifier of fraud.
The aims of external hearer are set chiefly by their primary client and legislative act which is the board of managers. The of import work as external hearers is to give an independent sentiment on the organisation ‘s fiscal statements.
( B ) Internal control is the procedure designed and implemented by the senior directors of an administration who are charged by the stockholders with efficaciously pull offing the administration on their behalf. Five types of internal control are:
The control environment
The hearer should obtain a sufficient cognition of the control environment to understand direction ‘s and the board of manager ‘s attitude, consciousness and actions refering the environment.
The entity ‘s hazard appraisal procedure
The hearer should obtain sufficient cognition of the entity ‘s hazard appraisal procedure to understand how direction considers and reference hazard relevant to fiscal coverage.
The information system
The hearer should obtain sufficient cognition of the accounting information system to understand the categories of minutess that are important to the fiscal statements.
The hearer should obtain an apprehension of those control activities needed to be after the audit. Control activities that may be relevant to scrutinize be aftering include public presentation reappraisals and information processing
The monitoring of controls
The hearer should obtain sufficient cognition of the major types of activities that the entity uses to supervise internal control over fiscal coverage, including internal hearers.
ANSWER FOR QUESTION 2:
( a ) Degree of disaggregation in the information available to the hearer, the handiness and dependability of fiscal and non fiscal informations, comparison of available information.
( B ) Accounting Records – Check add-ons and cross-casts of the gross revenues twenty-four hours book and gross revenues returns twenty-four hours book. Check a sample of the posters of single bills to the GL and the control history. Check entries in the gross revenues twenty-four hours book and gross revenues returns twenty-four hours book to original bills, recognition notes and despatch notes and frailty versa.
Bills and recognition notes – Check numerical sequence of bills and recognition notes asking into losing Numberss and inspecting transcripts of all off bills. Check computations and add-ons of bills and recognition notes. Scrutinise recognition notes for big ot unusual points.
Analytic processs – Analyse and reexamine fluctuations in gross revenues degrees
Cut off processs – Identify and look into big points in the last month and the first month of the following period.
ANSWER FOR QUESTION 3:
( a ) ( I ) The hearer should measure whether there is significant uncertainty about the entity ‘s ability to go on as a traveling concern for a sensible period of clip, non to transcend 1 twelvemonth beyond the day of the month of the fiscal statements being audited. However, the hearer is non required to plan audit processs specifically to place conditions and events that indicate a “ traveling concern ” job.
( a ) ( two )
( B ) Procedures required
The hearer should see whether the consequences of his or her usual audit processs indicate that there could be significant “ traveling concern ” uncertainties. Id the hearer has significant uncertainty about the entity ‘s ability to go on as a traveling concern for a sensible period of clip, he or she should obtain information about direction ‘s programs to extenuate the job, asses the likeliness of effectual execution of the programs, identify those elements that are particularly important to extenuating the traveling concern job and should be after and execute scrutinizing processs to obtain evidentiary affair about those elements.
ANSWER FOR QUESTION 4:
( a ) Audit planning means the hearer should be after the audit so that the battle will be performed in an effectual mode for illustration to measure and cut down hazard that the fiscal statements may be misstated to an acceptable degree, while hazard appraisal is a necessary measure in a risk-based attack to scrutinize is that the external hearers plan the audit around the hazards that client ‘s Financial Statement may incorporate misstatements.
( B )
Built-in hazard is the susceptibleness of an history balance or category of minutess to material misstatement, either separately or when aggregated with misstatements in other balances or categories, irrespective of related internal controls.
Audit hazard is the hazard that hearers may give an inappropriate audit sentiment on fiscal statements. Audit hazard has three constituents which are sensing hazard, control hazard and built-in hazard.
Detection hazard is the hazard that hearers substantial processs ( trials of inside informations of minutess and balances or analytical processs ) do non observe a misstatement that exists in an history balance or category of minutess that could be material, either separately or when aggregated with misstatements in other balances or categories.
Control hazard is the hazard that inaccurate statements could happen in category of minutess or an history balance and that could be material, either separately or when aggregated with misstatements in other categories or balances, would non be prevented, or detected and corrected on a timely footing, by the accounting and internal control systems.
( degree Celsius ) Before accept nomination from new client, there are processs that should be considered. Ensure that there are no ethical issues which are a barrier to accepting nomination.
The significance of ethical menaces should be evaluated. The house should set up the facts and fortunes behind the proposed alteration so that they can make up one’s mind whether it would be appropriate to accept the battle. Ensure that the hearer is professionally qualified to move and there are no legal or proficient barriers. Ensure that the existing resources are equal in footings of staff, expertness and clip to execute the battle. Obtain mentions for the managers, if they are non known personally to the audit house. Communicate straight with the existing/current hearer to set up facts and fortunes behind the proposed alteration.
ANSWER FOR QUESTION 5:
( a )
( B ) Materiality is an look of the comparative significance or importance of a peculiar affair in the context of fiscal statements as a whole. A affair is material if its skip or misstatement could act upon economic determinations of users of fiscal statements.
The construct of materiality is used by hearers to measure the impact of any mistake or skip in the fiscal statements and to find how many and what points to try in audit processs.
( degree Celsius ) SELF INTEREST THREATS occur as a consequence of the fiscal or other involvements of members/professional comptrollers or close household members.
SELF REVIEW THREATS occur when a old opinion demands to be evaluated by the members or professional comptrollers responsible for the opinion.
ADVOCACY THREATS occur when members or professional comptrollers promote a place or sentiment to the point that subsequent objectiveness may be compromised. It is common for members to recommend their client ‘s place and it is non improper every bit long as deceptive information is non provided.
FAMILIARITY THREATS occur when, because of a close relationship, members or professional comptrollers go excessively sympathetic to the involvements of others.
INTIMIDATION THREATS occur when members or professional comptrollers may be deterred from moving objectively by menaces, existent or perceived.
( vitamin D ) SELF INTEREST THREATS occur as a consequence of the fiscal or other involvements of members/professional comptrollers or close household members. FAMILIARITY THREATS occur when, because of a close relationship, members or professional comptrollers go excessively sympathetic to the involvements of others.
( vitamin E ) Precautions created by the profession, statute law or ordinances. For illustrations, educational, preparation and experience demands for entry into the profession, go oning professional development demands ( CPD ) and Professional Standards.
Precautions in the work environment. For illustrations, enlisting processs in the house stressing the importance of using high-calibre competent staff, appropriate disciplinary procedures and audience with another appropriate professional comptroller.
Precautions created by the person. For illustration, keeping contact with legal advisers and professional organic structures