Eff Date: 17-05-2021 000 A Section 1 (24 Marks) Exxaro Ltd is a mining company listed...

 

Transcribed Image Text:

Eff Date: 17-05-2021 000 A Section 1 (24 Marks) Exxaro Ltd is a mining company listed on the Johannesburg Stock Exchange under the mining industry. The company is planning to expand its operations offshore by opening subsidiaries in the international markets. Given the market sentiment driven by the increase in the share price of Exxaro, the board of directors has advised the Chief Financial Officer that the company's financial statements must be audited in order to attract more investors and to increase the cash flow of the group company. PWC is considering to accept the engagement letter from Exxaro but the Audit Senior Mr Lereko is aware that Pre-engagement activities were not performed. 1 Advise him on the matters that must be considered during the pre-engagement activity on the following items i) ii) iii) Performing a new client investigation Determining the skills and competencies requirements Establishing the terms of the engagement looking at the integrity of Exxaro (4) (4) (5) 2 Explain the risk assessment procedures that Mr Lereko should perform to obtain information on the acceptance of the engagement of Exxaro? (3) 3 Mr Lereko is not sure about the sources that he must use for obtaining information relating to Exxaro. Advise him about the possible sources that he can to obtain information about Exxaro? (4) 4 Explain the inherent limitations of an audit that Mr Lereko will encounter when auditing in auditing Exxaro? (4) Eff Date: 17-05-2021 000 A Section 1 (24 Marks) Exxaro Ltd is a mining company listed on the Johannesburg Stock Exchange under the mining industry. The company is planning to expand its operations offshore by opening subsidiaries in the international markets. Given the market sentiment driven by the increase in the share price of Exxaro, the board of directors has advised the Chief Financial Officer that the company's financial statements must be audited in order to attract more investors and to increase the cash flow of the group company. PWC is considering to accept the engagement letter from Exxaro but the Audit Senior Mr Lereko is aware that Pre-engagement activities were not performed. 1 Advise him on the matters that must be considered during the pre-engagement activity on the following items i) ii) iii) Performing a new client investigation Determining the skills and competencies requirements Establishing the terms of the engagement looking at the integrity of Exxaro (4) (4) (5) 2 Explain the risk assessment procedures that Mr Lereko should perform to obtain information on the acceptance of the engagement of Exxaro? (3) 3 Mr Lereko is not sure about the sources that he must use for obtaining information relating to Exxaro. Advise him about the possible sources that he can to obtain information about Exxaro? (4) 4 Explain the inherent limitations of an audit that Mr Lereko will encounter when auditing in auditing Exxaro? (4)

Answer rating: 100% (QA)

ANSWER 1 Mr Lereko should consider the following matters during the preengagement activity on the acceptance of Exxaro i Performing a new client inves... View the full answer