AUD 3B: Auditing 3B Exam Questions – Comprehensive Study Guide (UJ BCom Accounting)

This study guide provides exam‑focused notes for AUD 3B / AUE3B Auditing 3B as typically taken in the BCom Accounting programme at South African universities, with particular emphasis on the University of Johannesburg (UJ). It is written to mirror the style and depth of questions frequently seen in UJ Auditing 3B past exam papers, tutor tests, and supplementary assessments. The focus is on understanding exam patterns, core concepts, and how to structure high‑quality answers under time pressure.

1. Course Context and Exam Landscape: UJ Auditing 3B (AUD 3B / AUE3B)

1.1 Where AUD 3B Fits in the UJ BCom Accounting Curriculum

In the University of Johannesburg (UJ) BCom Accounting degree, Auditing 3B (often coded AUE3B or AUD 3B) is a senior‑level module that builds on the foundational and intermediate auditing content covered in Auditing 2A, 2B, and any introductory assurance modules. By the time students take Auditing 3B, they are expected to:

Be familiar with basic assurance concepts from earlier levels (e.g. from first‑year “Introduction to Auditing” or second‑year “Auditing 2A/2B”).
Understand South African regulatory frameworks, especially:
- Companies Act 71 of 2008
- Auditing Profession Act 26 of 2005
- Independent Regulatory Board for Auditors (IRBA) requirements
Have been introduced to International Standards on Auditing (ISA) and IRBA Code of Professional Conduct.

Auditing 3B then deepens this foundation and moves the focus towards:

Application of theory in realistic case‑study scenarios
Designing and evaluating audit procedures
Higher‑order thinking: analysis, evaluation, and professional judgement

This is exactly what exam questions in AUD 3B are designed to test.

1.2 Typical Learning Outcomes Tested in AUD 3B Exams

Exams for UJ Auditing 3B consistently aim at the following learning outcomes:

Identify and explain ethical and professional responsibilities
- Apply the IRBA Code of Professional Conduct (integrity, objectivity, professional competence and due care, confidentiality, professional behaviour).
- Identify and evaluate threats to independence and appropriate safeguards.
Understand and apply the audit process
- Planning, risk assessment, determining materiality and performance materiality.
- Designing responses to assessed risks at financial statement and assertion level.
- Evaluating audit evidence and drawing conclusions.
Apply International Standards on Auditing (ISAs) in context
- Particularly:
  - ISA 200 – Overall Objectives of the Independent Auditor
  - ISA 240 – The Auditor’s Responsibilities Relating to Fraud
  - ISA 315 (Revised) – Identifying and Assessing Risks of Material Misstatement
  - ISA 330 – Responses to Assessed Risks
  - ISA 500–580 – Audit Evidence, Sampling, Confirmations, Written Representations, etc.
  - ISA 700, 705, 706 – Forming an Opinion and Reporting
Perform and document audit procedures
- Tests of controls
- Substantive procedures (analytical procedures and tests of details)
- Use of audit sampling and CAATs (computer‑assisted audit techniques)
Perform ‘mini’ professional analysis and reporting
- Identify reportable irregularities
- Draft audit report extracts
- Comment on whether an audit opinion is appropriate given the scenario.

Exams test your ability not only to know the standards, but to apply them correctly in context.

1.3 Exam Structure and Question Styles in Auditing 3B (UJ Focus)

While exact formats vary by semester, typical UJ Auditing 3B exams include:

1–2 long case‑study questions (25–40 marks each)
- Multi‑part: e.g. (a) identify risks, (b) recommend procedures, (c) comment on evidence, (d) reporting implications.
- Require integration of ethics, risk assessment, evidence, and reporting.
Medium‑length scenario questions (15–25 marks)
- Focused on a specific topic:
  - Audit sampling
  - Substantive testing for a specific cycle (e.g. revenue, inventory)
  - Analytical procedures
  - Subsequent events and going concern
Short knowledge‑based theory questions (5–15 marks)
- “List and explain” type:
  - Qualitative factors affecting materiality
  - Objectives of an internal control system
  - Elements of an assurance engagement
  - Types of audit opinions and circumstances

Typing vs. written exams:
UJ may use written, typed on‑campus, or online proctored assessments. However, the marking rubric remains the same: answers must be structured, concise, and clearly demonstrate application of ISA‑based principles.

1.4 How AUD 3B Exams Differ from Lower‑Level Auditing Modules

Compared with Auditing 1 and Auditing 2A/2B, Auditing 3B exams:

Contain fewer pure theory questions, more application and judgement.
Expect students to quote and apply ISA principles, not necessarily full paragraph numbers, but clear reference to what the standards require.
Place strong emphasis on:
- Risk‑based auditing
- Audit evidence sufficiency and appropriateness
- Audit reporting and modifications
Require integrated reasoning: e.g.
- From risk → to control weakness → to substantive procedure → to potential misstatement → to reporting implication.

1.5 Common Cross‑References: Other SA Universities and Search Keywords

Students often search online using similar keywords across universities, such as:

“UJ Auditing 3B past exam papers with solutions”
“AUD 3B study notes UJ BCom Accounting”
“AUE3B UJ exam questions and answers”

Comparable modules exist at other South African universities:

UNISA AUE3702 / AUE3703 – Advanced Auditing
CUT AUD30B – Auditing 3B (Central University of Technology)
UP FRK 300 / AUE 300 – Auditing in third‑year BCom Accounting

While course codes differ, the core exam topics align closely with those in UJ Auditing 3B, particularly relating to ISAs, ethics, risk assessment, evidence, and reporting.

2. Core Exam Themes and Frequently Examined Topics

2.1 High‑Frequency Topics in UJ Auditing 3B Exam Questions

Over multiple semesters, high‑weight topics in AUD 3B include:

Ethics and Independence
- Threats: self‑interest, self‑review, advocacy, familiarity, intimidation
- Safeguards: firm‑level and engagement‑specific
- Situational questions: gifts, hospitality, long association, provision of non‑assurance services
Risk Assessment and Planning (ISA 315 and ISA 330)
- Understanding the entity and its environment
- Identifying and assessing risks of material misstatement (RMM)
- Linking risks to assertions and designing appropriate responses
Internal Control Systems
- Components of internal control (control environment, risk assessment, control activities, information and communication, monitoring)
- Evaluating control deficiencies and their impact on audit strategy
- Designing tests of controls
Substantive Procedures by Cycle
- Revenue and receivables
- Purchases and payables
- Inventory
- Cash and bank
- Non‑current assets
- Provisions and contingencies
Audit Evidence and Sampling
- Types and sources of audit evidence
- Sufficiency vs. appropriateness
- Statistical and non‑statistical sampling
- Selecting samples and projecting misstatements
Fraud, Laws and Regulations (ISA 240 and ISA 250)
- Management’s and auditor’s responsibilities
- Indicators of fraud and response
- Non‑compliance with laws and regulations
Subsequent Events and Going Concern (ISA 560, ISA 570)
- Types of subsequent events and their treatment
- Procedures to identify subsequent events
- Evaluating going concern, management’s assessment, and disclosure
Audit Reporting (ISA 700, 705, 706)
- Unmodified vs. modified opinions
- Qualified, adverse, and disclaimer of opinion
- Emphasis of Matter (EOM) vs. Other Matter (OM) paragraphs
- Reportable irregularities (as required by IRBA and South African law)

2.2 Typical Question Patterns for Core Topics

Below are common exam question types linked to the high‑frequency topics.

2.2.1 Ethics and Independence Questions

Pattern: “You are the audit manager of UJ Auditors Inc. for the audit of Orange Ltd…” scenario.

Typical requirements:

Identify and explain threats to independence in the scenario.
Recommend safeguards to eliminate or reduce the threats.
Evaluate whether the firm can continue or accept the engagement.

Expected approach:

Name the threat category (e.g. self‑interest).
Explain why the situation creates that threat.
Suggest specific safeguards (e.g. rotation of staff, declining non‑assurance service).
Conclude on acceptability of continuing the engagement.

2.2.2 Risk Assessment and Planning Questions

Pattern: Extract from a client’s background (industry, operations, previous audit findings, internal control issues).

Typical requirements:

Identify business risks and risks of material misstatement.
Link them to assertions (existence, completeness, accuracy, valuation, rights and obligations, presentation and disclosure).
Design further audit procedures (tests of controls and/or substantive procedures).

Expected approach:

For each fact in the scenario, ask:
- “What could go wrong in the financial statements?”
Name the assertion and state the risk clearly.
Propose specific procedures that respond directly to that risk.

2.2.3 Internal Control and Substantive Procedures Questions

Pattern: Control description for a cycle (e.g. inventory count procedures).

Typical requirements:

Evaluate whether controls are adequate and effective.
Identify control weaknesses, their consequences, and recommend improvements.
Design tests of controls.
Design substantive procedures if controls are weak.

Expected approach:

Analyse each control point:
- Good? Weak? Missing?
For each weakness:
- Implication: risk of misstatement.
- Recommendation: improvement.
Relate your analysis to specific audit assertions.

2.2.4 Evidence, Sampling, and Reporting Questions

Pattern: Extract of working papers showing sample results.

Typical requirements:

Evaluate the sufficiency and appropriateness of audit evidence.
Project misstatements to the population and evaluate materiality.
Decide whether additional procedures are needed.
Decide whether an audit opinion modification is necessary.

Expected approach:

Interpret sample results, calculate misstatement percentage.
Compare to tolerable misstatement / performance materiality.
Reasonably conclude if further work or adjustment is required.
Consider basis for opinion and type of modification, if any.

2.3 Mapping Exam Topics to ISAs and South African Requirements

A simplified mapping helpful for exam revision:

Topic Area	Relevant ISA / SA Standard	Typical Exam Focus
Ethics & Independence	IRBA Code of Professional Conduct; Auditing Profession Act	Threats & safeguards, reportable irregularities
Planning & Risk Assessment	ISA 200, 300, 315 (Revised), 330	Risk identification, audit strategy, linkage to procedures
Internal Control	ISA 315 (Revised), COSO framework (conceptually)	Control environment, control activities, deficiencies
Audit Evidence	ISA 500, 505, 520, 530, 580	Sufficiency, appropriateness, sampling, confirmations, analytics
Fraud & Laws/Regulations	ISA 240, 250	Fraud risk factors, response, communication to those charged with governance
Subsequent Events/Going Concern	ISA 560, 570	Procedures, disclosure, reporting implications
Audit Reporting	ISA 700, 705, 706	Opinion types, emphasis of matter, modifications

Understanding these connections is critical in UJ Auditing 3B exam questions, where markers look for ISA‑aligned reasoning, even if not all paragraph numbers are cited.

3. Exam Technique: Analysing and Answering AUD 3B Case‑Study Questions

3.1 Reading and Planning Under Time Pressure

In a typical 3‑hour UJ Auditing 3B exam worth, for instance, 100 marks, allocate roughly 1.5 to 1.8 minutes per mark. For a 30‑mark case study:

Spend 5–8 minutes:
- Reading the case
- Underlining key facts
- Planning headings and structure

Key techniques:

Underline or highlight:
- Dates and timelines (for subsequent events)
- Monetary amounts and materiality clues
- Words indicating risk (e.g. “rapid expansion”, “cash‑based sales”, “poor segregation of duties”)
- Related‑party relationships
Margin notes:
- Write “RISK – existence of inventory” next to relevant sentence.
- Jot down “threat – familiarity” near independence issues.
Scan the requirements first:
- Know whether you must:
  - Identify risks
  - Propose procedures
  - Comment on audit report
- Read the scenario with these in mind.

3.2 Structuring Answers for Maximum Marks

Markers in UJ AUD 3B allocate marks per well‑structured point. Develop the habit of using headings, subheadings, and point form:

Example structure for a 20‑mark risk and procedure question:

1. Risk of Material Misstatement – Revenue Recognition
- Risk: Revenue may be overstated due to early recognition of sales near year‑end.
- Assertion: Cut‑off; existence; accuracy.
- Reason: The company offers year‑end promotions and sales staff receive commission based on annual sales.
2. Audit Procedures – Revenue Cut‑off
- Select a sample of sales invoices around year‑end (e.g. 10 days before and after year‑end) and:
  - Trace to dispatch notes and proof of delivery.
  - Verify that revenue is recognised in the correct accounting period.

Each risk with linked procedure could be worth 1.5–2 marks. Ten such paired points easily reach 15–20 marks.

3.3 Using the “Risk–Assertion–Procedure” Chain

One of the most useful exam frameworks is:

Risk → Assertion(s) affected → Tailored audit procedure(s)

Example mini‑case:

You are auditing UJ Furniture (Pty) Ltd, a furniture retailer. Goods are sold on credit. The scenario mentions:

Year‑end sales increased 40% compared to prior year.
New credit policies allow sales staff to override credit limits.

Possible answer fragment:

Risk of Material Misstatement – Trade Receivables
- Risk: Trade receivables may be overstated due to granting credit to customers who may not be able to pay.
- Assertions: Valuation; existence.
- Reason: Sales staff can override credit limits, increasing the chance of irrecoverable debts.
Audit Procedures – Valuation of Trade Receivables
- Review the age analysis of trade receivables and:
  - Identify long‑outstanding debts (e.g. >90 days).
  - Discuss collectability with credit control personnel.
  - Examine subsequent cash receipts after year‑end relating to long‑outstanding balances.
  - Assess whether the allowance for credit losses is adequate.

Each part shows the logical flow from scenario to risk to procedure, which is exactly what UJ Auditing 3B markers look for.

3.4 Answering Ethics and Independence Questions

When faced with ethics questions:

Identify the professional principle involved:
- Integrity, objectivity, professional competence and due care, confidentiality, professional behaviour.
Identify and classify the threat:
- Self‑interest, self‑review, advocacy, familiarity, intimidation.
Explain why (link to facts):
- Use “because”:
  - “This creates a self‑interest threat because the firm will have a financial interest in the outcome of the engagement…”
Recommend specific safeguards:
- Rotate senior personnel.
- Separate teams for different services.
- Decline or withdraw from engagement.
- Disclose the relationship to those charged with governance and obtain consent where appropriate.

Short example:

Scenario: The partner’s spouse is the financial director of the client, UJ Manufacturing Ltd.

Answer fragment:

Threat to Independence – Familiarity and Self‑Interest
- The partner responsible for the audit is married to the financial director of UJ Manufacturing Ltd. This creates:
  - A familiarity threat, as the partner may be too trusting of the spouse’s representations and less likely to challenge management.
  - A self‑interest threat, as the partner has an indirect financial interest in the performance of the client (through the spouse’s remuneration and career prospects).
Safeguards
- The partner should be removed from the engagement and replaced with another partner with no such relationships.
- Additional quality control reviews should be performed by an independent partner.
- If no appropriate safeguards are available, the firm should decline the engagement.

3.5 Handling Audit Reporting and Opinion Questions

Exams often include a scenario where:

There is a material misstatement or scope limitation.
There may be going concern uncertainty.
You must decide what type of opinion is appropriate.

Use a step‑by‑step test:

Is there a misstatement or a limitation on scope?
- Misstatement → Qualified or adverse.
- Scope limitation → Qualified or disclaimer.
Is the issue material but not pervasive, or material and pervasive?
- Material but not pervasive → Qualified opinion.
- Material and pervasive → Adverse (for misstatement) or Disclaimer (for limitation).
Is there a material uncertainty appropriately disclosed (e.g. going concern)?
- If well disclosed, usually an unmodified opinion with an Emphasis of Matter.
- If not adequately disclosed, a modified opinion.

Answer fragment example:

Because the client has refused to allow the auditor to attend the year‑end inventory count and no satisfactory alternative procedures can be performed, there is a limitation on scope regarding inventory. Inventory is material but not pervasive to the financial statements. Therefore, the auditor should express a qualified opinion due to a limitation of scope, using the phrase “except for” in the opinion paragraph.

3.6 Common Answer‑Writing Mistakes to Avoid

Being too generic:
- “Check documents” or “verify with evidence” earns no marks. Specify: “Inspect signed sales invoices and dispatch notes…”.
Not linking to assertions:
- Risk and procedure answers should mention which assertion(s) are addressed.
Ignoring the mark allocation:
- A 10‑mark question needs roughly 8–10 distinct, fully explained points, not 3 long paragraphs.
Writing in essay style without structure:
- Use bullets, subheadings, and point form to make marking easy.
Failing to conclude:
- For reporting questions: always state clearly which type of opinion should be issued and why.

4. Topic‑by‑Topic Exam Notes with Applied Examples

4.1 Audit Risk, Materiality, and Planning

4.1.1 Audit Risk Components (ISA 200)

Audit risk = Risk of Material Misstatement (RMM) × Detection Risk (DR), where:

RMM = Inherent risk × Control risk
Inherent risk: susceptibility of an assertion to misstatement, assuming no controls.
Control risk: risk that a misstatement will not be prevented or detected and corrected by internal controls.
Detection risk: risk that the auditor’s procedures will not detect an existing misstatement.

Exam‑style application:

Scenario: UJ Electronics (Pty) Ltd sells fast‑moving consumer electronics, with:

Rapid technological change.
Significant judgment in estimating obsolete stock.

Exam response:

Inherent Risk (Inventory Valuation)
- Inventory is subject to rapid obsolescence due to technological changes.
- High judgment required in estimating net realisable value.
- Therefore, inherent risk relating to valuation of inventory is high.
Control Risk
- If scenario indicates poor stock management and weak controls (e.g. no regular stock counts), control risk is also high, leading to a high RMM.
- Auditor must plan more extensive substantive procedures and accept a lower detection risk.

4.1.2 Materiality and Performance Materiality

Materiality in planning:

Quantitative (e.g. 5–10% of profit before tax; 0.5–1% of revenue; 1–2% of total assets).
Qualitative factors:
- Breach of loan covenants.
- Impact on key ratios.
- Related‑party transactions.
- Fraud, regardless of amount (often considered material).

Performance materiality: Set at level below overall materiality to reduce the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality.

Exam example:

Given:

Profit before tax: R5,000,000
You decide on 5% as a benchmark: R250,000 as overall materiality.
You set performance materiality at 70% of overall: R175,000.

Exam may require:

Explaining why materiality is set at that level.
Using materiality in evaluating sample misstatements and deciding if misstatements are acceptable.

4.1.3 Planning Documentation and Audit Strategy

Planning documentation typically includes:

Audit strategy: Overall scope, timing, and direction of the audit.
Audit plan: Detailed nature, timing, and extent of procedures.

Possible exam tasks:

“List matters to be considered in planning the audit of XYZ Ltd.”
“Explain the benefits of adequate audit planning.”

Key points:

Understanding the business and industry.
Identifying significant accounts and disclosures.
Assessing risk of material misstatement.
Determining materiality and performance materiality.
Planning use of internal audit and experts.

4.2 Internal Control Systems and Tests of Controls

4.2.1 Components of Internal Control

Commonly tested components:

Control Environment
- Tone at the top, management philosophy, organisational structure.
Entity’s Risk Assessment Process
- How management identifies and manages business risks.
Control Activities
- Authorisation, performance reviews, information processing controls, physical controls, segregation of duties.
Information System and Communication
- Capturing and processing transactions; reporting.
Monitoring of Controls
- Internal audit, management reviews, corrective actions.

Exam requirement example:

“Describe control activities that should be in place over the sales cycle for UJ Retailers Ltd.”

Answer points:

Segregation of duties: Separate order taking, dispatch, invoicing, and recording.
Authorisation: Credit limits approved by credit manager.
Pre‑numbered documents: Sales orders, delivery notes, invoices.
Reconciliations: Daily reconciliation of sales records to inventory movements and cash receipts.

4.2.2 Identifying and Evaluating Control Deficiencies

Scenarios often describe weak controls, such as:

One person responsible for issuing credit notes, authorising returns, and recording them.

Exam tasks:

Identify weakness.
Explain implication (risk).
Recommend improvement.

Example answer fragment:

Weakness: The same individual is responsible for authorising returns, issuing credit notes, and recording them in the accounting records.
Implication: This lack of segregation of duties increases the risk of fraudulent credit notes being issued to misappropriate cash receipts, leading to an understatement of revenue and receivables.
Recommendation: Segregate duties:
- Returns should be authorised by a supervisor separate from the person recording them.
- Regular review of credit notes by an independent person.

4.2.3 Designing Tests of Controls vs. Substantive Procedures

Tests of controls: Performed to evaluate the operating effectiveness of controls in preventing or detecting and correcting misstatements.

Example (sales cycle):

Inspect a sample of 30 sales transactions and:
- Check that sales orders are authorised.
- Verify that credit limits are checked and documented.
- Confirm that the invoice is matched to authorised sales order and dispatch note.

Substantive procedures: Detect misstatements at the assertion level.

Example (sales revenue):

Perform substantive analytical procedures:
- Compare current year monthly sales to prior year, investigate significant fluctuations.
Perform tests of details:
- Select a sample of invoices and trace to dispatch notes and customer orders.

In an exam, you may be asked to:

Distinguish tests of controls from substantive procedures.
Provide examples of each for specific scenarios.

4.3 Substantive Procedures by Assertion and Cycle

4.3.1 Revenue and Receivables

Key assertions for revenue:

Occurrence (existence): Sales recorded occurred and relate to the entity.
Completeness: All sales that occurred are recorded.
Accuracy: Amounts are recorded correctly.
Cut‑off: Recorded in correct accounting period.
Classification: Recorded in proper accounts.

Common exam requirement: “Describe substantive procedures to test the occurrence, completeness, and accuracy of revenue for UJ Retailers Ltd.”

Answer outline:

Occurrence
- Select a sample of recorded sales invoices and:
  - Trace to underlying customer orders and dispatch notes.
  - Inspect evidence of delivery (signed delivery notes).
- Confirm selected sales with customers (as part of receivables confirmations).
Completeness
- Select a sample of dispatch notes around year‑end and:
  - Trace to sales invoices and sales journal.
- Reconcile total sales recorded with VAT returns and management reports.
Cut‑off
- Select sales invoices before and after year‑end (e.g. last 5 days of year and first 5 days after year‑end).
- Trace to dispatch notes and ensure sales are recorded in correct period based on dispatch date.

4.3.2 Inventory

Key assertions:

Existence, completeness, rights and obligations, valuation and allocation.

Common exam task: “List substantive procedures to verify the valuation of inventory for UJ Manufacturing Ltd.”

Answer points:

Review entity’s inventory valuation method (e.g. FIFO, weighted average) and ensure consistent application.
Inspect inventory for damage, obsolescence during attendance at stock count.
Obtain inventory age analysis and identify slow‑moving or obsolete items.
Compare selling prices to cost for selected items to ensure NRV ≥ cost.
Check that overheads are allocated to inventory on a reasonable basis.

4.4 Audit Evidence, Sampling, and Analytical Procedures

4.4.1 Types and Sources of Audit Evidence (ISA 500)

Common types:

Inspection (records, documents, tangible assets)
Observation
External confirmation
Recalculation
Reperformance
Analytical procedures
Inquiry

Ranking by reliability:

External > internal; direct auditor knowledge > indirectly obtained.

Exam requirement:

“Explain the difference between sufficiency and appropriateness of audit evidence, giving examples.”

Answer:

Sufficiency: Quantity of audit evidence (sample size). Influenced by:
- RMM (higher risk → more evidence).
- Quality of evidence.
Appropriateness: Quality of evidence (relevance and reliability).
- External confirmations more reliable than internal documents.

4.4.2 Audit Sampling (ISA 530)

Key concepts:

Sampling risk vs. non‑sampling risk.
Statistical vs. non‑statistical sampling.
Attribute sampling (for tests of controls).
Monetary‑unit sampling or variable sampling (for substantive testing).

Common exam tasks:

Define audit sampling.
Explain factors affecting sample size:
- Tolerable misstatement.
- Expected misstatement.
- Population size.
- RMM.
Calculate projected misstatement and compare to tolerable misstatement.

Example:

Population of trade receivables: R2,000,000.
Auditor tests a sample of R200,000 and finds misstatements of R10,000.
Projected misstatement = (R10,000 / R200,000) × R2,000,000 = R100,000.
If tolerable misstatement = R120,000:
- Projected misstatement < tolerable misstatement; may be acceptable but auditor must also consider qualitative aspects.

4.4.3 Analytical Procedures (ISA 520)

Types:

Trend analysis – comparing current period with prior periods.
Ratio analysis – e.g. gross profit margin, current ratio.
Reasonableness testing – e.g. expected interest income based on average bank balances and interest rates.

Exam requirement:

“Explain the use of analytical procedures at:
1. Planning,
2. Substantive testing,
3. Overall review stages of the audit.”

Answer points:

Planning stage:
- To identify unusual transactions or events and areas of potential risk.
- E.g. gross profit margin significantly lower than prior year.
Substantive testing:
- As substantive analytical procedures, if appropriate (predictable relationships, reliable data).
- E.g. payroll expense, rental expense.
Overall review:
- Assess whether the financial statements are consistent with the auditor’s understanding of the entity.
- E.g. compare key ratios to industry averages.

4.5 Fraud, Laws and Regulations, Subsequent Events, and Going Concern

4.5.1 Fraud and Error (ISA 240)

Management responsibilities:

Designing and implementing systems to prevent and detect fraud.
Ensuring financial statements are free from material misstatement.

Auditor responsibilities:

Maintaining professional scepticism.
Identifying and assessing fraud risk factors.
Designing and performing procedures responsive to fraud risks.
Communicating identified or suspected fraud to management and those charged with governance.

Common exam tasks:

Distinguish fraud from error.
Provide examples of fraud risk factors.
Explain how an auditor should respond to suspected fraud.

4.5.2 Laws and Regulations (ISA 250)

Auditor’s duty:

Obtain general understanding of applicable legal and regulatory framework.
Perform procedures to identify non‑compliance with laws that have a direct and material effect on the financial statements (e.g. tax laws).
Be alert to non‑compliance with other laws that could have a material effect.

Exam might ask:

“Explain auditor’s responsibilities regarding non‑compliance with laws and regulations in the South African context.”

Include:

Consideration of reportable irregularities in terms of the Auditing Profession Act and IRBA requirements.
Obligation to report certain irregularities to IRBA within specific time frames.

4.5.3 Subsequent Events (ISA 560)

Types:

Adjusting events: provide evidence of conditions that existed at year‑end (e.g. bankruptcy of a customer after year‑end, where financial difficulties existed at year‑end).
Non‑adjusting events: indicative of conditions that arose after year‑end (e.g. major fire damaging assets after year‑end).

Procedures:

Read minutes of meetings after year‑end.
Inquire of management regarding subsequent events.
Review subsequent interim financial statements.

Exam question example:

“Describe audit procedures to identify subsequent events for UJ Logistics Ltd.”

4.5.4 Going Concern (ISA 570)

Key indicators:

Financial: net liability position, negative cash flows, loan defaults.
Operating: loss of major customer, labour difficulties.
Other: legal proceedings, natural disasters.

Auditor procedures:

Evaluate management’s assessment of going concern.
Analyse cash flow forecasts and budgets.
Review subsequent events after year‑end.
Discuss plans with management (e.g. cost‑cutting, refinancing).

Reporting:

If there is a material uncertainty adequately disclosed:
- Unmodified opinion with Emphasis of Matter.
If not adequately disclosed:
- Modified opinion (qualified or adverse).

Exam pattern:

Given financial difficulties of a client, you may be asked to:
- Identify going concern indicators.
- Suggest additional procedures.
- Explain reporting implications.

4.6 Audit Reporting and Opinions (ISA 700, 705, 706)

4.6.1 Types of Opinions

Unmodified opinion
- Financial statements present fairly, in all material respects.
Qualified opinion
- Material but not pervasive misstatement or limitation.
Adverse opinion
- Material and pervasive misstatement.
Disclaimer of opinion
- Material and pervasive limitation of scope; sufficient appropriate audit evidence cannot be obtained.

4.6.2 Modifications and Emphasis of Matter

Exam questions often provide scenarios and ask:

“Explain the type of audit opinion that should be issued and justify your answer.”
“Draft an appropriate modification paragraph.”

Remember:

Emphasis of Matter: Refers to a matter correctly presented in the financial statements which is fundamental to users’ understanding (e.g. significant uncertainty).
Other Matter: Refers to a matter not presented in the financial statements but relevant to understanding the audit or auditor’s responsibilities.

5. Integrated Exam Preparation Strategy for UJ Auditing 3B (AUD 3B)

5.1 Aligning Your Study with UJ Exam Patterns

To maximise performance in UJ Auditing 3B:

Gather past exam papers and tutorials
- Focus on the last 3–5 years of:
  - June/November main exams.
  - Supplementary/Deferred exams.
Identify recurring question types
- Ethics, independence scenarios.
- Risk assessment and procedure design.
- Internal control evaluation.
- Audit report modifications.
Create topic‑question mapping
- For each major topic, list:
  - Which years and papers it appeared.
  - Typical mark allocation.

This helps allocate study time to high‑yield areas.

5.2 Building Answer Templates and Frameworks

Develop templates you can adapt quickly:

Ethics answer template
- Principle → Threat → Explanation → Safeguards → Conclusion.
Risk and procedure template
- Risk of material misstatement → Assertion → Audit procedure.
Control weakness template
- Weakness → Implication → Recommendation.
Reporting template
- Nature of issue → Is misstatement or limitation? → Material vs. pervasive? → Opinion → Paragraph content.

Using these templates under exam conditions allows you to:

Structure answers quickly.
Avoid leaving marks unattempted.
Demonstrate clear professional reasoning.

5.3 Active Practice: Writing Out Full Answers

Passive reading is not enough. For AUD 3B:

Time‑bound practice:
- Choose a 25‑mark past question.
- Give yourself 40 minutes.
- Write full answers, not bullet lists in your mind.
Self‑marking using memoranda:
- Compare your answer to available solutions (if provided in lectures or tutorials).
- Identify:
  - Missing points.
  - Overlong explanations where short point‑form would suffice.
  - Misapplied ISA concepts.
Error log:
- Maintain a notebook of:
  - Concepts you got wrong.
  - Types of questions you struggle with (e.g. sampling calculations, fraud procedures).

Revisit this error log weekly.

5.4 Memory Techniques for Standards and Assertions

You don’t need to memorise every paragraph number of ISAs, but you must know:

The names and basic content of major ISAs.
The list of assertions for classes of transactions and account balances.

Useful mnemonic for transaction assertions (OCCAC):

Occurrence
Completeness
Cut‑off
Accuracy
Classification

For account balances (ECRV):

Existence
Completeness
Rights and obligations
Valuation and allocation

Ensure you can, without notes, list:

Objectives of ISA 240 (fraud).
Objectives of ISA 315 (risk assessment).
Objectives of ISA 330 (responses to assessed risks).
Types of audit opinions under ISA 700/705.

5.5 Managing Exam Stress and Time in AUD 3B

In high‑pressure exams such as UJ Auditing 3B:

Allocate time per mark:
- E.g. 1.5 minutes per mark. For 20 marks, give yourself ~30 minutes.
Move on if stuck:
- Write what you know and proceed. Return later if time permits.
Use headings and subheadings:
- Helps you think clearly, and helps markers allocate marks easily.
Stay professional in tone:
- Answers should be written as if you are a junior audit trainee writing working paper notes or memos for a manager.

5.6 Common Pitfalls Seen in UJ Auditing 3B Scripts

Markers often comment on:

Copying scenario text without analysis:
- You must interpret facts and link them to audit risks and procedures.
Insufficient depth for high‑mark questions:
- A 10‑mark requirement needs detailed, multi‑step answers, not a few short bullet points.
Confusing internal audit with external audit:
- Know differences in objectives, scope, and reporting lines.
Misunderstanding opinion types:
- Confusing qualified and adverse opinions.
- Failing to identify when a disclaimer is required.

Focusing on these weak areas during revision raises your overall performance significantly.

This detailed exam‑oriented guide on “AUD 3B: Auditing 3B Exam Questions” is tailored to the University of Johannesburg (UJ) BCom Accounting context. It sets out the core topics, exam patterns, high‑yield concepts, and answer frameworks needed to perform strongly in Auditing 3B (AUD 3B / AUE3B), and aligns with the style and expectations of South African university auditing modules at this level.