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NEW QUESTION: 1
A government department is conducting a value for money audit on a school.
The school's pupils sit leaving exams. Classify each of the audit tests as either economy and efficiency or effectiveness.
NEW QUESTION: 2
A purpose of a management representation letter is to reduce:
A. The scope of an auditor's procedures concerning related party transactions and subsequent events.
B. The possibility of a misunderstanding concerning management's responsibility for the financial
C. An auditor's responsibility to detect material misstatements only to the extent that the letter is relied on.
D. Audit risk to an aggregate level of misstatement that could be considered material.
Choice "C" is correct. A purpose of a management representation letter is to reduce the possibility of a
misunderstanding concerning management's responsibility for the financial statements. The first
representation made in the letter states "we are responsible for the fair presentation in the financial
statements of financial position, results of operations and cash flows in conformity with GAAP."
Choice "A" is incorrect. The management representation letter confirms oral representations made by
management but does not have an effect on audit risk.
Choice "B" is incorrect. The management letter is important audit evidence but it does not reduce the
auditor's responsibility to detect material misstatements.
Choice "D" is incorrect. The management letter is important audit evidence but it does not reduce the
scope of an auditor's procedures concerning related party transactions and subsequent events (or any
other generally accepted audit procedure).