Illustrating the audit trail of stock purchases

Reference no: EM13981033

QUESTION 1:

1. Explain why it is important for the independent auditor to be a member of a professional body.

2. Explain the difference between a qualified, unqualified and negative audit report

3. Refer to the bold sentence in paragraph 1. Why do the auditors include this sentence in their report? Briefly explain.

4. Refer to the words in bold in paragraph 2:

a) Give an example of "evidence" that an auditor would use by illustrating the audit trail of stock purchases.

b) Give ONE example of the "accounting principles" he/she would assess as part of the audit with regards to stock specifically. Explain why the auditor would inspect this principle.

5 Refer to paragraph 3. Explain why you should be satisfied with this audit opinion.

QUESTION 2:

Pre-Adjustment Trial Balance on 31 August 2014 of KG Limited. The authorized share capital consists of 400 000 ordinary shares.

Ordinary share capital (300000 shares)	540,000
Retained Income	120,000
Dividends on ordinary shares	30,000

On the 31 August 2014, 30 000 shares were repurchased from a shareholder at P2 30 each The director declared a final dividend of 15c per share

REQUIRED

Prepare the following notes to the Balance Sheet

Note 7: Ordinary Share capital

Note 8: Retained Income

Reference no: EM13981033

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