In the course of the audit of ABC Stationers Ltd. for the year ended 30 June 2001,
you have noted and recorded in the audit working papers, the following evidential
matters:
1. Flowcharts of the company‟s payroll prepared by your audit assistant backed up by
tests of controls.
2. An oral statement by the production director that the expected working life of
plant acquired during the year is ten years.
3. A letter to the managing director from the company‟s bank manager indicating
that the bank intends to extend overdraft facilities for a period of one year.
4. A list of items of inventory counted by a member of your audit team during
observation of the company‟s annual stock count.
5. A letter from a customer to your firm in reply to a confirmation request indicating
agreement with the balance recorded in the books of ABC Stationers Ltd.
Required:
a) With respect to each matter listed above, explain its relevance to the overall audit
objective of forming an opinion and reporting on the financial statements. (10
marks)
b) Explain your judgment on the reliability of the audit evidence obtained in five
ways listed above.
(10 marks)