General Notes In Auditing

Question 1

Compliance

Answer 1

• Co Act
• King IV
• CPC

Question 2

review engagement is appropriate

Answer 2

• xxx is not a public company and therefore it might not need an audit.
• xxx is not listed (Pty Ltd), therefore an audit is not required from a JSE regulations perspective.
• The MOI of xxx does not require and audit.
• The exemption in S30(2A) of the Companies Act not applicable as all shareholders are not directors.
• There is no mention of the company holding shares in fiduciary capacity therefore would not require an audit

Public interest Score Calculation
1 Point per average employee = 20
1 Point per R million in 3rd party liability = 9,2+5,4 million = 15
1 Point per R million in turnover = 84,290 million = 85 (or 86 as stated in info)
1 Point per shareholder = 2 directors and 1 company = 3
Total = 123

• The financial statements are externally compiled using a service organisation
• Therefore, the company would need a review engagement as the financials are externally compiled and the PIS is between 100 and 350).

Question 3

Other things to include in your discussions

Answer 3

• APA is legislation applicable to Auditors
• s44 APA Duties in relations to audit link to pre-engagement and audit opinion
• s45 APA Reportable irregularity
• s46 APA Auditors liability (link to criticize WP, wrong opinion dos not necessarily mean liability
  
  • Prove negligence/ fraud

Question 4

Other legislation

Answer 4

• FICA (Financial intelligence center)_money laundering (Weak management integrity, fraud)
• NCA (National Credit Act_s22 CoAct) (IFRS 9)
• POCA_ Prevention of organised crimes Act (racketeering)
• PRECCA_ Prevention and combating of corrupt activities Act (Bribe)
• POPI_Protection of personal information (ISA 250)
• PFMA (Public Sector)

Question 5

impact article will have had on the audit

Answer 5

• possible ‘bribery’ would have increased the overall risk of material misstatement for the 2021 audit due to:
• Management integrity appearing to be weak as a result of the allegations
• Non-compliance with IFRS and SARS Tax laws due to..
• Possible Going concern issues may arise due to..
• Consider RI
• ***Audit response???
• Possibly decreasing our final audit materiality due to this increased risk.
• ISA 240
• Professional scepticism in all other areas of the audit.
• Considering all prior representations that have already been made by management in other aspects of the audit.
• Obtaining more corroborating or 3rd party reliable evidence in all audit areas.
• Focusing increased attention on other areas of the audit where the following may have occurred:
• Possible non-compliance with other relevant Laws and Regulations.
• Tax evasion’ in other audit areas - i.e.. claiming other expenditure deductions not permitted.
• Other Questionable Contracts with Government or other suppliers.
• Will need to consider this as part of ISA 560 testing with regard to the entity continuing as a going concern for the foreseeable
  future.
• Whether we have any further responsibilities in terms of Section 225 of the SAICA CPC (NOCLAR)
• We may possibly need to obtain legal advice in this regard
• disclosed in “Other Legal and Regulatory” paragraph
• ISA 265

Question 6

Questions they should have asked

Answer 6

IFRS 15 ISSUE

• management aware that this is incorrect? Was this done in the prior year?
• Is there generally a signifcant difference in the time period, is this signifcant at year end?
• we able to quantify the Rand amount of this error at year end (cut-off) and record on the schedule?
• signifcant control deficiency it must be reported to those Charged with Governance in terms of ISA 265
• Considered whether it must be reported as a KAMS in the 2021 Audit Report.

DEBTORS ISSUE:

• How was the sample selected for the Debtors confirmations sent, was it random statistical
• Was this the only difference that was noted in the confirmation process?
• Have you followed up on the reason for this - was it merely a cut-off error, or was Pifurn unaware of the matter
• Is there any fraud risk indication
• In order to include an amount on the schedule, the difference should be extrapolated to the entire population

TESTING A SAMPLE:

• How was the sample selected, was it random statistical
• Why was it recorded twice, was it a system error or merely human error / an anomaly
• Why did the system/controls not identify this duplicate? Are exception reports not produced?
• Wages affects PAYE, UIF etc, this needs to be considered, should this be a recurring issue.