Clear and concise answers please.

1. Describe six methods by which it might be possible to mitigate risks.

2.A company's statement of profit or loss shows that it has generated substantial profits

but its cashflow statement indicates that it has suffered a large outflow of cash during

the same period. The figures are reliable and free from distortion.

Explain whether this set of circumstances warrants any major concern.

3.

Assess in each case below whether or not management representation would be a substitute for

other audit evidence. If not state what other types of audit evidence you would obtain.

i.

Management's plans to alleviate adverse financial conditions that caused the auditor to

have initial doubt about the entity's ability to continue as going concern.

ii.

Management's plans with respect to disposal of a segment of a business.

iii.

Representations about obsolete and damaged inventory.

iv.

Management represents that all financial records have been made available for review

by the auditor.

v.

Representations about the collection of a material related party receivable.

4.

The XYZ company bought a new machine for 80,000. The assumed useful life of the

machine is 10 years. At the end of this time, its estimated scrap value is 5,000. The

company charges depreciation on this machine using the reducing balance method.

The value of the machine in XYZ's statement of financial position after two years is:

A 22,005

B 45,948

C 60,000

D 65,000

5.

i) You are an audit manager in Mwangi & Co. Certified Public Accountants, responsible for the audit ofTemesi Lid., a large company which provides information technology services to businesses. The finance director of Temesi Lid has contacted you to inform you of a fraud being perpetuated by members of its sales team. It appears that several sales representatives have been claiming reimbursement for fictitious travel and client entertainment expenses and also inflating actual expenses incurred. Specifically, it has been alleged, that the sales representatives had daimed for the following 1. Items such as gills for clients and office supplies which were never actually purchased. 2. Business class airline tickets but in reality they had purchased economy tickets. 3. Non-existent business mileage. 4. The sales representatives were also alleged to have used the company credit card to purchase items for personal use. The finance director of Temesi Lid. is worried about this fraud as travel and client entertainment is one of the company's largest expenses. All of the alleged fraudsters have been suspended pending investigations, which he would like your audit firm to conduct." Temesi Lid. will prosecute these employees in an attempt to recoup its losses if evidence shows that a fraud has indeed occurred. Your audit team will be expected to provide an expert witness in the event of a court case. Temesi Lid. has a small internal audit department and in previous years, the evidence obtained as part of the external audit has indicated that the control environment of the company is generally good. The audit opinion on the financial statements of Temesi Lid. on 31 March 2013 was unmodified. The finance director wishes to meet with you to discuss the investigation into this fraud Required: Explain the matters that should be discussed in the meeting with the finance director in respect of planning the investigation into the alleged fraudulent activity. (b) Summarise the auditor's responsibilities for the appropriateness of the going concern assumption as a basis for the preparation of financial statements