Reference no: EM132803129

Question 1 - a) Define materiality. Explain how this concept reflected in the auditor's report.

b) Define professional judgement. Describe 3 methods how professional judgement can e enhanced.

c) List 5 differences between internal auditor and external auditor. Which of them is definitely Not an employee of the company being audited.

Question 2 - a) Define 'expectation gap' in audit.

b) Suggest 3 methods to reduce the expectation gap in audit.

c) List and explain 3 expectation gaps in audit.

Question 3 - The following notes are summary of the internal control system in Larry Bhd.

New customer obtained by the sales staff are required to undergo a full credit check. A credit limit is proposed by sales staff and approved by the sales manager and these credit limits remain static, without any changes in the sales system.

Monthly inventory counts are undertaken at each of the 9warehouse because a full year-end inventory count is too disruptive for Larry Bhd. Hight value items are stored in a secured warehouse. Access is via 5 digit code, which for convenience is the same across all 9 warehouse. Some of the monthly inventory counts were not performed due to the company's reorganization programmed.

Monthly bank reconciliation were undertaken by Sarah, the account clerk and details of all reconciling items are included. The reconciliation is sent to Zayn, the financial controller, for review if reconciling items is significant. Liam, the finance director approves all purchase invoices for payment 75 days after receipt of the invoice in order to maximizes cash balances.

REQUIRED - Describe 5 internal control weakness in the internal control system of Larry Bhd. For each weakness, recommend a control to overcome that weakness.