1.

What are the implications if management refuses to sign a management representation letter? If management signs a management representation letter, is that a good indication that all of management’s statements described in the letter are actually true?                                  ( 6 marks)

List five factors that may indicate that a client may not remain a going concern. For each, indicate the degree of subjectivity and judgment that would be required in determining if the indicator would, in fact, result in the company going bankrupt.                                        (6 marks)

QUESTION TWO

Step-wise Ltd. a company based in Accra, without consulting its Chartered Accountant (CA), has changed its accounting so that it is not in accordance with international accounting principles (IASs). During the regular audit engagement the CA discovered that the statements based on the accounts were so grossly misleading that they might be considered fraudulent.

 

Required: 

Discuss the specific action to be taken by the CA.                                                      (4 marks)

What type of opinion would the CA issue? Why?                                                       (4 marks)

In this situation what obligation does the CA have to a new auditor if he is replaced? Discuss briefly.                                                                                                                           (5 marks)