Question 7 a) Broadly speaking, audit tests can be categorised into Compliance testing' and 'Substantive testing' Required: Explain when each of these tests in terms of types of tests within each category, when they are carried out, and the reasons for doing these tests. In your explanation, you should give examples. (10 marks) b) Below is a list of audit tests and audit evidence. Required: Explain, giving reasons, which management assertions in the financial statements are audited by these tests, and/or supported by these audit evidence. You should also state whether the audit test/evidence on their own is sufficient or that additional tests need to be performed to obtain additional evidence to support the audit conclusion. i) A representation provided by the finance director concerning a substantial sales contract made with a foreign government. (3 marks) ii) A walk through (cradle to grave) test of the sales system (3 marks) iii) A signed debtor's confirmation letter from a credit customer which agrees that a balance in the list of accounts receivable at the year end of the company that you are auditing is correct (3 marks) iv) A letter to the auditor from the company's lawyers confirming that, as far as they are aware, the outcome of a pending court case brought by a disgruntled employee who was dismissed earlier this year is not likely to lead to a financial liability by the company. (3 marks) v) Physical inspection of tangible non-current assets (3 marks) (Total: 25 Marks)