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a) ISA: 505 External Confirmations states that the auditor should determine whether the use of external confirmations is necessary to obtain sufficient appropriate audit evidence at the assertion level. An Auditor may obtain external confirmations from third parties to corroborate the audit evidence already available with the auditor. The Auditor shall determine whether positive or negative request is appropriate given the condition. Responses or events of non-responses are required to be evaluated. Responses may be unreliable if they are served indirectly to the auditor, not served by the intended person or transmission is compromised and the auditor may have to perform additional procedures to resolve doubts and suspicion. In events of non-responses or management refusal to permit the auditor to seek confirmations, the auditor shall assess if modification in the auditors report is necessary. Required: Explain FOUR (4) examples of external confirmations and for each one identify: an audit assertion that the external confirmation supports; and an audit assertion that the external confirmation does NOT support. (15 marks)

b) Mfundo & Co., a firm of Auditors with a number of clients listed on the Eswatini Stock Exchange, recently held a staff training session on quality control. During the session, staff raised matters from their experience relating to the ethical code on independence. Some of these matters are outlined below: i) Shortly before commencing the final audit of a large listed company, a Junior Staff member on the audit team inherited a substantial number of shares in that company. No action was taken because, although representing a large investment for the staff member concerned, the number of shares was totally immaterial with respect to the company. Moreover, the partner knew that if the companys result is announced, there will be a rise in the share price and he did not think it was fair to require the staff member to sell them beforehand. ii) The Management Accountant of another listed client company had an accident and was away from work for three months. At the time of the accident, the audit senior was winding up the prior years audit. Given his familiarity with the companys management accounting system, it was agreed that he would take over as Management Accountant for the three months. Required: Discuss whether Mfundo & Co had complied with the IFACs Code of Ethics or had acted unprofessionally in any other way with respect to each of the above scenarios. (10 marks) [Total: 25 marks]

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