Question 1: Alwaysfast Ltd. was formed on 1 July 2007 and its action is to deal in computer and accessories. The directors are hesitant as to their responsibilities, and the nature of their relationship with the external auditors. The audit partner has asked you to visit the client and describe to the directors the more basic aspects of the accountability.
You are required to describe to the directors of Alwaysfast Ltd:
a) Why there is a requirement for an audit?
b) How the auditor of a company might be appointed under the Companies Act.
c) What is the auditor’s right under the Companies Act.
Question 2: The examination of evidence is basic to the audit procedure. International Standard of Auditing (ISA) 500 states that: the auditors must obtain adequate appropriate audit evidence to be capable to draw reasonable conclusions on which to base the audit opinion. Evidence is available to the auditors from sources under their own control, from management of the company and from third parties. Each of such sources presents the auditors with differing considerations as to quality of the evidence so generated.
Required:
a) In brief describe what are relevant, reliable and adequate audit evidences.
b) Describe the quality of the following kinds of audit evidence, giving two illustrations of each form of evidence.
• Evidence originated by the auditors
• Evidence made by third parties
• Evidence made by the management of the client.