Question 3 SET MATERIALITY TO EVALUATE AUDIT FINDING (15 marks) An auditor will take account of both quantitative and qualitative considerations during an audit assignment. As such he will consider risk of material misstatement at assertion level accounts receivable, inventory, etc. Ai Planning stage of an audit the auditor will set materiality levels for both Control Risk and inherent Risk Required 1. Describe with ONE example each what is meant by Quantitative and Qualitative considerations? (2x35 marks each 7 marks) 2. ABC is an audit and assurance firm which has recently accepted the audit of XYZ. During the planning of the audit, the engagement manager has noted the following information regarding XYZ for consideration in the risk assessment of the assignment XYZ is a listed company operating in the financial services sector XYZ has a large network of subsidiaries, associates and foreign branches The company does not have an internal audit department and its audit committee does not include any members with a background in finance as suggested in the corporate governance guidelines . It is the auditors policy to keep the overall audit risk below 10% a) Calculate the overall Detection Risk if the Control Risk is 60% and inherent Risk is 60% where the Audit Risk Modelis: AR-CRX IR DR b) Comment upon your findings with regard to the sufficiency of audit evidence the auditor must gather to arrive at an audit opinion 2 x 4 marks each - 3 marks)