Question 1

Part I

Advise an audit trainee what is the audit expectation gap, and what can be the reasons for this gap?

Part II

Distinguish between independence in fact and independence in appearance. State three activities that may not affect independence in fact but are likely to affect independence in appearance.

Part III

Discuss three reasons why auditors are responsible for 'reasonable' but not 'absolute' assurance.

Part IV

ASA500 requires the auditor to obtain sufficient appropriate evidence to support the opinion issued in an audit report. Auditors must be persuaded that their opinion is correct with a high level of assurance. In the audit of Jones Computer Parts Co. Ltd the auditor concludes there is a high likelihood of obsolete inventory.

Required: 

Identify the two factors that determine the persuasiveness of audit evidence.