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Question 3 10 Marks (a) The total value of accounts payables is $1,200,000 consisting of 850 items. The auditor randomly selected 65 items for testing. The dollar value of the sample of accounts payables selected for testing is $180,000. Assume the auditor discovered errors totalling $17,600 when conducting the substantive testing of the sample. Required: Extrapolate the errors to the population and calculate the total projected error. Show all workings. (2 marks) (b) What would the auditor conclude if the projected error calculated in (a) above fell below the tolerable error set for materiality? (2 marks) Question 3 continued over next page (c) Required: (i) What are substantive audit procedures? (2 marks) (ii) If both control risk and inherent risk is determined to be low, what impact would this have on detection risk and what impact would this have on the auditors overall audit strategy? (2 + 2 marks) 10 Marks Question 5 (a) The total value of accounts payables is $2,600,000 consisting of 950 items. The auditor randomly selected 85 items for testing. The dollar value of the sample of accounts payables selected for testing is $290,000. Assume the auditor discovered errors totalling $27,600 when conducting the substantive testing of the sample. Required: Extrapolate the errors to the population and calculate the total projected error. Show all workings. (3 marks) (b) What would the auditor do if the projected error calculated in (a) above exceeded the tolerable error set for materiality? (3 marks) Question 5 continued over next page Question 5 continued (c) What is a substantive audit test? (2 marks) (d) If the auditor concluded internal controls could not be relied on, what impact would this have on the overall audit strategy? (2 marks)

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