(10 marks) REQUIRED: Answer the following questions by listing which of the given statements for each is correct. 4.1 The responsibility for adopting a sound and appropriate financial reporting framework and corresponding accounting policies, maintaining adequate internal controls, and making fair representations in the financial statements rests A) with management. B) with the auditor. C) equally with management and the auditor. D) with the internal audit department. 4.2 There is agreement within the auditing profession and the courts that the auditor is A) not a guarantor or insurer of financial statements. B) a guarantor but not an insurer of financial statements. C) an insurer but not a guarantor of financial statements. D) both a guarantor and an insurer of financial statements. 4.3 The factor that distinguishes an error from fraud or other irregularities is A) materiality. B) intent. C) whether it is a rand amount or a process. D) whether it is caused by the auditor or the client. ANNEXURE F: FORMATIVE ASSESSMENT 1 4.4 If the auditor were responsible for making certain that all the assertions of management in the statements were correct. A) bankruptcies could no longer occur. B) bankruptcies would be reduced to a very small number. C) audits would be much easier to complete. D) audits would not be economically practical. 4.5 What in auditing is the application of relevant knowledge and experience, within the context provided by auditing and accounting standards and the Code of Professional Conduct, in reaching decisions where a choice must be made between alternative possible courses of action? A) professional judgement B) professional scepticism C) professional behaviour D) professional standard 4.6 The requirement for an attitude of scepticism means that the auditor should A) perform additional tests of controls to increase the probability of discovering fraud or errors. B) plan and conduct the audit with an attitude of distrust in management. C) not be blind to evidence that suggests the documents, books, or records have been altered or are incorrect. D) not consider management's explanation as evidence on any subject. 4.7 Management assertions are A) stated in the footnotes to the financial statements. B) implied of expressed representations about the accounts in the financial statements. C) explicitly expressed representations about the financial statements. D) provided to the auditor in the engagement letter but are not disclosed on the financial statements. 4.8 Motswani Limited decided that it wanted to improve its earnings. To do this, it understated its expenses by omitting unpaid expenses from the accrued liabilities account at year-end. Which management assertion has been violated? A) existence B) disclosure C) rights and obligations D) completeness 4.9 BuildABrick (Pty) Ltd decided to inflate sales by recording fictitious sales. Several non-existent clients were created, and the sales were added into the sales journal throug.

1. (10 marks) REQUIRED: Answer the following questions by listing which of the given
statements for each is correct. 4.1 The responsibility for adopting a sound and appropriate
financial reporting framework and corresponding accounting policies, maintaining adequate
internal controls, and making fair representations in the financial statements rests A) with
management. B) with the auditor. C) equally with management and the auditor. D) with the
internal audit department. 4.2 There is agreement within the auditing profession and the courts
that the auditor is A) not a guarantor or insurer of financial statements. B) a guarantor but not an
insurer of financial statements. C) an insurer but not a guarantor of financial statements. D) both
a guarantor and an insurer of financial statements. 4.3 The factor that distinguishes an error from
fraud or other irregularities is A) materiality. B) intent. C) whether it is a rand amount or a
process. D) whether it is caused by the auditor or the client.
ANNEXURE F: FORMATIVE ASSESSMENT 1 4.4 If the auditor were responsible for making
certain that all the assertions of management in the statements were correct. A) bankruptcies
could no longer occur. B) bankruptcies would be reduced to a very small number. C) audits
would be much easier to complete. D) audits would not be economically practical. 4.5 What in
auditing is the application of relevant knowledge and experience, within the context provided by
auditing and accounting standards and the Code of Professional Conduct, in reaching decisions
where a choice must be made between alternative possible courses of action? A) professional
judgement B) professional scepticism C) professional behaviour D) professional standard 4.6
The requirement for an attitude of scepticism means that the auditor should A) perform
additional tests of controls to increase the probability of discovering fraud or errors. B) plan and
conduct the audit with an attitude of distrust in management. C) not be blind to evidence that
suggests the documents, books, or records have been altered or are incorrect. D) not consider
management's explanation as evidence on any subject. 4.7 Management assertions are A) stated
in the footnotes to the financial statements. B) implied of expressed representations about the
accounts in the financial statements. C) explicitly expressed representations about the financial
statements. D) provided to the auditor in the engagement letter but are not disclosed on the
financial statements.
4.8 Motswani Limited decided that it wanted to improve its earnings. To do this, it understated
its expenses by omitting unpaid expenses from the accrued liabilities account at year-end. Which

2. management assertion has been violated? A) existence B) disclosure C) rights and obligations D)
completeness 4.9 BuildABrick (Pty) Ltd decided to inflate sales by recording fictitious sales.
Several non-existent clients were created, and the sales were added into the sales journal
throughout the year. The general transaction-related audit objective affected by these actions is
A) occurrence. B) completeness. C) accuracy. D) posting and summarization. 4.10 Georgina was
working as a part-time accountant for three small businesses. Whenever she could, she pocketed
cash and neglected to record the sale in the sales system. The general transaction-related audit
objective affected by her actions is A) occurrence. B) completeness. C) accuracy. D) posting and
summarization. (101mark)