Question

1. Many students would argue that signing the confidential agreement restricted E&W from getting proper evidence. Thus; their scope was restricted. Create a valid reason why E&W would sign this agreement? If clients-impose restrictions so the scope of the audit is really restricted what type of opinion would you issue in this situation and why?
2. When auditing accounts receivables there are a few procedures to verify that the a/r is valid and collectable. One acceptable test is to look to see if the a/r was paid after year end. This is normally reliable evidence. Why was it not in this situation?

Answer 1

Page-1 Signing the confidental agreement restricted sothe scope of the adult is really bestricted, in my opionion - Anadult is the examination of the financial sepoots for an equity in voder to determine whether the information presented reflects the financial position of the entity at a given date. en adult aims to identify material miss- statements in the financial statements and includes but is not limited to misstatements besulting from fraud where beasonable suspicion exists. An adult provides a beasonable level of assurance in the from of a positive statement such as presents faroly' oo presents a true and fais view. in adult doesn't give absolute assurance but es the highest leve of assurance provided by auditors. It involves detailed testing such as substanting balances and evidence gathering. - A beview on the other hand provides only limited assurance. The opinion given would be in a foom such as we have not become aware of any matter that the statements are not in accordance with the required frame wook. o beview involves less detail than an audit and involves more equity of management / staff and analytical review wook cather than substantiating balances.

page-2 A review does not need to be carried out by a registered company auditor but their greater experience in this area typicall- means better value is delivered from the beview. Analytical Procedures Analytical procedure is a type of evidence used during an audit. These procedures can bedicate possible problems with the financial records of a client, which can then be investigated more thoroughly. Analytical procedures involve comparisions of different sets of financial & operational information, to see if historical belationships are continuing forward into the period under review. In most cases, these relationships should remain consistent over time If not, it can imply that the client's financial records are incorrect, possibly due to enboos oo fradulent reporting activity.