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QUESTION
The primary objective of external audit is to examine the financial statements of the organization and to give an opinion as to whether the financial statements are free from material misstatements. Auditors will have to regard to both the quantitative and qualitative aspects of materiality.
Required
(a) Identify three aspects by which auditors may consider materiality. Illustrate each aspect with a practical example.
(b) Describe the three categories of assertions implied in the financial statements which external auditors should use as a basis for their work. For each category, describe two detailed objectives that auditors may use to design and perform their evidence gathering procedures.
(c) The auditor should obtain relevant and reliable audit evidence sufficient to enable him to draw reasonable conclusions therefrom
(i) What is meant by the term "audit evidence" and state what it comprises
(ii) What factors would influence the auditor's judgment of whether or nor the evidence so collected was sufficient
(iii) State the factors that would enable an auditor to assess the reliability of evidence that he has collected.
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