Question 1

ISAs(NZ)  Agreeing the Terms of Audit Engagements provides guidance on the content of engagement letters and deals with the auditor’s responsibilities in agreeing the terms of the audit engagement with management.

You are required to :-

• State the purpose of an engagement letter. ( 5 Marks)
• List all the matters that included within this audit engagement letter.(8 Marks)

Question 2

• Why audit independence is important to an auditor? ( 3 Marks)
• What are those threats to independence? ( 6 Marks)
• What governed auditor’s independent in New Zealand? ( 6 Marks)
• How can auditor safeguards themselves from independent threats? (5 Marks)

Question 3

• In what circumstances is a company required to have an audit? ( 8 Marks)
• Discuss the advantages of a company being audited. Be as convincing and comprehensive as possible. ( 8 Marks)
• What consequences can there be if an auditor does not comply with generally accepted auditing standards? ( 4 Marks)
• What four points does a plaintiff need to establish in order to successfully take action against the auditors for negligence? ( 5 Marks)
• What are the major steps in the audit process? ( 8 Marks)

Question 4

• Should external auditors rely on works done by internal auditor? (5 Marks)

Explain the differences between internal and external audit. (10 Marks)

Question 5

A research paper by Porter et al.(2012) examines the expectation gap in New Zealand and the United Kingdom using surveys. It reports that the expectation gap has grown wider in New Zealand over the last twenty years, and speculates that this may be due to the continuation of self-regulation.

Reference: Porter. Ohogartaigh,C. and Baskerville,R.2012, Audit Expectation-Performance Gap, Revisited: Evidence from New Zealand and the United Kingdom, Part 1. International Journal of Auditing 16(2): 101-129.

Required:

• Explain the issue of the expectation gap.(5 Marks)
• Name and briefly describe the components of the audit expectation gap that are concerned with auditors’ duties in the area of fraud. ( 6 Marks)
• Discuss what practical measures have been taken to reduce the audit expectation gap related to fraud. ( 8 Marks)

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