a) An auditor should form an opinion on the adequacy of the accounting treatment of an inherent uncertainty disclosed in the financial statements of a company.

i) What is meant by the term “inherent uncertainty”? (2 marks)
ii) Explain the treatment of inherent uncertainties in the auditor’s report. (6 marks)

b) Summarise the principal contents of a statement of directors’ responsibilities to be included in financial statements. (8 marks)

c) Explain the steps an auditor should take if he concludes that the client has made a departure from an accounting standard in the preparation of the financial statements.
(4 marks)
(Total: 20 marks)

The computerization of business operations has posed many challenges to the auditor. Explain the difficulties experienced by an auditor in each of the following situations: i) In the use of test packs. (4 marks) ii) In on-line systems. (4 marks)