AUD20AB: Auditing 2 Past Papers and Memos – Comprehensive Exam Study Guide (CUT)

This study guide is written for Central University of Technology (CUT) students registered for AUD20AB: Auditing 2, particularly those preparing for semester tests, June exams, and November exams using past papers and memos. It also helps students from other South African universities (e.g. Unisa’s AUE2602, AUE3702; and similar Auditing 2 modules at TVET colleges) because the underlying principles and exam styles are comparable. The focus is on building exam technique around the most examinable topics, using patterns observed in typical South African Auditing 2 papers.

1. Understanding AUD20AB and the Role of Past Papers

1.1 Position of AUD20AB in the CUT Accounting Diplomas

AUD20AB: Auditing 2 at the Central University of Technology (CUT) typically forms part of the second-year curriculum in Diploma in Accounting and related programmes, such as the Diploma in Internal Auditing. It builds on first-year auditing and accounting modules (often codes like AUD10AB, ACC10AB, or similar depending on your year of registration) and prepares you for more advanced assurance work and, eventually, for modules comparable to Auditing 3 at universities like Unisa (for example AUE3701 and AUE3702).

In very broad terms, AUD20AB tends to cover:

• The audit process in detail (from planning to reporting).
• Internal control systems, especially in key business cycles.
• Audit evidence, documentation, sampling, and substantive testing.
• Tests of controls and compliance procedures.
• Application-type questions using scenario-based case studies.
• Basic exposure to computerised environments and possibly CAATs.

The exact syllabus might change slightly over time, but scanning CUT study guides, tutorial letters, and past papers shows that the module consistently focuses on practical application of ISA-based principles rather than rote theory alone.

1.2 Why Past Papers and Memos Matter for AUD20AB

Past papers and their official memos are one of the strongest predictors of:

• Question type (short theory, application, calculations, case-study style).
• Mark allocation patterns.
• Depth expected at diploma level.
• Common phrases and verbs used in questions (e.g. “explain”, “discuss”, “evaluate”, “identify”, “recommend”).

For AUD20AB, working systematically through past CUT examination papers and comparing them with past Unisa AUE2602/AUE2601-style questions is helpful because:

1. Topics repeat in cycles, just with different scenarios:

   • Internal control over cash receipts and payments.
   • Internal control over purchases and inventory.
   • Audit risk and materiality.
   • Planning and documentation.
   • Audit evidence and procedures.

2. The style of questioning is similar across institutions:

   • For example, a CUT AUD20AB question on internal control over inventory often looks like a Unisa AUE2602 internal control question: a short scenario followed by “identify weaknesses and recommend improvements.”

3. Past papers teach you time management:

   • You learn how long to spend on a 10-mark vs 25-mark question.
   • You understand the expected depth per mark (usually ±1 to 1.5 minutes per mark).

1.3 Typical Structure of an AUD20AB Exam Paper

Although every semester may be slightly different, a typical three-hour AUD20AB final exam (similar to mid-year November CUT papers) may look structurally like:

• Question 1: Short theory and definitions (20–30 marks).
• Question 2: Internal control case study (25–30 marks).
• Question 3: Audit evidence & procedures on a specific cycle (25–30 marks).
• Question 4: Planning, risk, materiality, and documentation (20–25 marks).

OR:

• Section A: Objective or short questions (20–30 marks).
• Section B: 2–3 long scenario questions (70–80 marks total).

Based on CUT audit past paper patterns and comparable Unisa AUE2602/AUE3702 formats, expect:

• High weighting on internal controls and audit procedures.
• Less emphasis on pure memory-type questions and more on scenario-based application.

1.4 Using Past Papers Strategically (Not Just Repetition)

A common mistake is to memorise answers from memos without internalising why those points were awarded marks. Instead:

• Analyse WHY the answer is correct:
  • Which audit principle or ISA concept is being tested?
  • Which control objective is being addressed?
• Identify the specific verbs used:
  • “List” vs “discuss” vs “explain” vs “evaluate” require different depth.
• Note how marks are split:
  • If 10 marks are given and the memo contains 10 bullet points, each is likely worth 1 mark (or ½ + ½ where explanation is required).

A useful framework when studying with past papers and memos:

1. Read the question carefully and underline:
   • The verb.
   • The topic (e.g. internal control, audit evidence).
   • The entity type (retailer, manufacturer, service, small business).
2. Attempt a timed answer without looking at the memo.
3. Only then compare your answer with the memo:
   • Tick what you got right.
   • Underline content you did not mention.
   • Add missing points to your summary notes.
4. Over time, compile your own AUD20AB summary sheet for:
   • Internal control points per cycle.
   • Standard audit procedures for common balances.
   • Planning and risk evaluation templates.

1.5 Links to Other South African Courses (Keyword Relevance)

Because many students search online using specific module codes, it is helpful to know the equivalent or related modules:

• CUT:
  • AUD20AB – Auditing 2 (this guide).
  • AUD30AB – Auditing 3 (advanced).
• Unisa (often used as extra practice material):
  • AUE1601 / AUE1602 – Introductory Auditing.
  • AUE2602 – Auditing: Theory and Practice (similar to AUD20AB).
  • AUE2601 – Internal Auditing or Auditing fundamentals.
  • AUE3701 / AUE3702 – Advanced External Auditing.
• Other SA universities and colleges:
  • TUT, UJ, CPUT, and several TVET colleges have Auditing 2 modules mirroring the same content areas.

When searching online for help, use keywords like:

• “AUD20AB past exam papers and memos CUT”
• “CUT auditing 2 internal control questions”
• “Auditing 2 study notes Unisa AUE2602”

This increases the chance of finding relevant South African-style questions which align with the exam expectation of your CUT AUD20AB module.

2. High-Yield Auditing Concepts Frequently Tested in AUD20AB

Past AUD20AB and Unisa AUE2602/AUE2601 papers show recurrent emphasis on several high-yield concepts. Understanding these at an application level is crucial.

2.1 The Audit Process: From Planning to Reporting

Auditing 2 courses almost always test your understanding of the stages of an audit:

1. Pre-engagement and acceptance:

   • Evaluating independence, competence, and ethics.
   • Engagement letters.

2. Planning:

   • Understanding the client’s business and industry.
   • Identifying risks of material misstatement.
   • Determining overall audit strategy and audit plan.

3. Internal control evaluation:

   • Documenting processes (narratives, flowcharts, questionnaires).
   • Identifying control strengths and weaknesses.

4. Tests of controls:

   • Testing the operating effectiveness of controls.
   • Deciding whether reliance can be placed on controls.

5. Substantive procedures:

   • Tests of details and analytical procedures to detect material misstatements in account balances and transactions.

6. Completion and reporting:

   • Assessing subsequent events, going concern, overall review.
   • Finalisation of working papers.
   • Issuing the audit report (unmodified, qualified, adverse, disclaimer).

Exam questions often present a scenario that sits within one or more of these phases and then ask:

• “Explain the audit procedures you would perform…”
• “Describe the documentation you would prepare…”
• “Evaluate the internal control system and recommend improvements…”

Understanding where the question fits into the audit cycle improves your answer structure and relevance.

2.2 Key Auditing Principles and Concepts

Below are core concepts repeatedly examined:

2.2.1 Audit Risk and Its Components

Audit risk is the risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated. It has three components:

• Inherent risk: Susceptibility of an assertion to misstatement, ignoring controls (e.g. cash, complex estimates).
• Control risk: Risk that a misstatement will not be prevented or detected and corrected by the entity’s internal controls.
• Detection risk: Risk that the auditor’s procedures will not detect a misstatement that exists.

Formula commonly tested:

Audit Risk (AR) = Inherent Risk (IR) × Control Risk (CR) × Detection Risk (DR)

Typical exam tasks:

• Identify factors increasing inherent risk or control risk in a scenario.
• Explain how high IR and CR affect nature, timing, and extent of substantive testing (i.e. DR must be reduced, so more rigorous testing).

2.2.2 Materiality

“Materiality” is frequently tested in both definition and application format:

• Definition: Information is material if its omission or misstatement could reasonably influence the economic decisions of users of the financial statements.
• Types:
  • Planning materiality.
  • Performance materiality.
  • Materiality for particular classes of transactions or accounts.

Possible exam tasks:

• Explain the concept and factors considered in determining materiality (e.g. size of entity, benchmarks like profit before tax, total assets).
• Discuss the effect of material misstatements on the audit opinion.

2.2.3 Assertions

Audit assertions often appear in evidence and procedures questions. Common assertions at financial statement level:

• For classes of transactions: occurrence, completeness, accuracy, cut-off, classification.
• For account balances: existence, rights and obligations, completeness, valuation and allocation.
• For presentation and disclosure: occurrence, completeness, classification and understandability, accuracy and valuation.

Exam questions may require:

• Matching substantive procedures to assertions (e.g. “To test existence of inventory, the auditor attends the stock count and performs test counts.”).
• Explaining the importance of certain assertions for high-risk balances.

2.3 Internal Control – A Core AUD20AB Topic

Internal control is almost always heavily weighted in Auditing 2 papers across South African universities, including CUT AUD20AB and Unisa AUE2602.

2.3.1 Components of Internal Control

Modern frameworks (e.g. COSO) identify the following components:

1. Control environment:

   • Tone at the top; ethics, governance, HR policies.

2. Risk assessment:

   • Process of identifying and analysing risks relevant to financial reporting.

3. Control activities:

   • Policies and procedures such as authorisations, segregation of duties, reconciliations, reviews.

4. Information and communication:

   • Systems supporting the identification, capture, and exchange of information.

5. Monitoring:

   • Ongoing or periodic assessments of the quality of internal control performance (e.g. internal audit).

Exam questions often indirectly assess these components in context of sales, purchases, payroll, inventory, cash, fixed assets.

2.3.2 Control Objectives and Types

Classic control objectives:

• Validity: Only genuine transactions are recorded.
• Completeness: All valid transactions are recorded.
• Accuracy: Transactions are recorded correctly.
• Authorization: Transactions are properly approved.
• Cut-off: Transactions are recorded in correct period.
• Classification: Transactions are correctly coded and posted.
• Safeguarding of assets and records

Types of controls:

• Preventative (e.g. password protection, credit approvals).
• Detective (e.g. bank reconciliations, exception reports).
• Corrective (e.g. follow-up procedures after discrepancies found).

These control objectives and types underpin most AUD20AB internal control questions.

2.4 Audit Evidence and Procedures

Another major topic is audit evidence:

• Sufficiency (quantity) and appropriateness (relevance and reliability).
• Types of procedures:
  • Inspection.
  • Observation.
  • Inquiry.
  • Confirmation.
  • Recalculation.
  • Reperformance.
  • Analytical procedures.

Exam tasks include:

• Listing and explaining audit procedures for a given balance (e.g. receivables, inventory).
• Distinguishing between tests of controls and substantive procedures.
• Evaluating sources of evidence in terms of reliability (e.g. external vs internal, written vs oral).

2.5 Documentation and Working Papers

CUT AUD20AB and comparable Unisa modules consistently emphasise audit working papers:

• Purposes:
  • Evidence of the audit work performed.
  • Basis for auditor’s opinion.
  • Support for supervision and review.
• Types:
  • Permanent file (e.g. MOI, long-term contracts).
  • Current file (e.g. current-year schedules, confirmations).
• Characteristics:
  • Should be complete, accurate, properly referenced, signed, and dated.

Typical exam tasks:

• Discuss the importance of documentation.
• Describe contents of particular working papers (e.g. inventory count working paper, bank reconciliation working paper).

2.6 High-Yield Comparison: CUT AUD20AB vs Unisa AUE2602

Based on publicly available Unisa past papers (e.g. AUE2602 past exam questions on internal control over cash, purchases, inventory) and typical CUT audit exam styles, these content overlaps are highly examinable:

Topic	Typical CUT AUD20AB Focus	Similar Unisa/AUE Module Focus
Internal control – cash	Cash receipts/payments; bank recon; petty cash	AUE2602 – Detailed internal control Qs
Internal control – purchases	Orders, GRNs, supplier invoices, creditors	AUE1601/2602 – Internal control cycle
Inventory and stock counts	Perpetual vs periodic, count procedures, cut-off	AUE2602/3702 – Stock counts scenario
Audit evidence	Procedures for balances (cash, debtors, creditors)	AUE2601/2602 – Basic substantive testing
Planning & risk	Understanding entity, risk identification	AUE2602/3701 – Risk-based planning
Working papers & documentation	Audit files, indexing, cross-referencing	AUE1601 – Basics of audit documentation

Using Unisa resources as supplementary practice can strengthen preparation for CUT AUD20AB exams if you align the topics correctly.

3. Analysing AUD20AB Past Papers: Question Patterns and Exam Technique

3.1 Common Question Types in CUT AUD20AB

Across multiple academic years, AUD20AB past papers typically present these question formats:

1. Define/Explain-type theory questions:

   • E.g. “Define ‘audit risk’ and explain its components.” (6–8 marks)
   • “Explain the purpose of audit working papers.” (4–6 marks)

2. Internal control evaluation questions:

   • Scenario describing a company’s process (sales, purchases, cash, payroll).
   • Requirements:
     • Identify strengths and weaknesses.
     • Recommend improvements.
     • Sometimes classify controls as preventative/detective.

3. Procedure-based questions:

   • E.g. “List and explain the substantive procedures you would perform on accounts receivable.” (10–15 marks)

4. Case study combining multiple topics:

   • Might include:
     • Background on a manufacturing company.
     • Questions on:
       • Internal controls.
       • Audit planning and risk.
       • Specific procedures for key balances.

5. Short scenario questions:

   • 2- to 4-mark sub-questions embedded within a bigger question:
     • “Name two advantages of using CAATs in auditing.”
     • “Explain the difference between tests of control and substantive procedures.”

3.2 Interpreting the Question Verb and Mark Allocation

Understanding the instructional verb is essential:

• List / State / Name:

  • Usually short phrases, not long explanations.
  • Marks typically 1 each (e.g. “List FOUR control objectives… 4 marks”).

• Describe / Explain:

  • Provide more detail and context, often 1–2 sentences per point.
  • Marks may be 2 per point (for explanation).

• Discuss / Evaluate / Critically evaluate:

  • Requires both sides of an argument, or a deeper analysis.
  • Use structured paragraphs or bullet points with explanation.

• Recommend / Advise:

  • Must be actionable, realistic, and targeted to the weakness or issue identified.
  • Link each recommendation explicitly to the weakness in your answer.

Mark allocation example:

Question: “Identify and explain FIVE weaknesses in the internal control over cash receipts. Provide a recommendation for each weakness.” (20 marks)

Likely marking scheme:

• Weakness identification: 1 mark each (5 marks).
• Explanation: 1 mark each (5 marks).
• Recommendation: 2 marks each (10 marks).
• Total: 20 marks.

If you only list weaknesses without recommendations, you lose potentially half or more of the marks.

3.3 Time Management in the AUD20AB Exam

Exam duration is typically 3 hours with around 100 marks total. That implies:

• ±1.8 minutes per mark, but a safer planning is 1.5–1.7 minutes per mark to allow reading and checking.
• For a 25-mark question, aim for around 35–40 minutes.

Basic strategy:

1. Scan the paper quickly for 5–7 minutes:

   • Identify the topics of each question.
   • Decide an answer order (start with topics you are strongest in).

2. Allocate time per question based on marks:

   • Write the planned end time at the top of each answer.

3. Move on when time is up:

   • It’s better to attempt every question at least partially than perfect one and leave another blank.

Past papers help you practice timed answering so that by the exam you know how much explanation fits into, say, a 10-mark answer.

3.4 Extracting Patterns from AUD20AB Past Papers

When you review multiple previous years (e.g. 2018–2023) for CUT AUD20AB (or from lecturers’ packs):

• Create a simple table summarising topics:

Year	Question 1	Question 2	Question 3	Question 4
2020	Theory definitions, audit risk	Internal control – cash	Audit procedures – inventory	Planning & documentation
2021	Audit process, evidence types	Internal control – purchases	AR & revenue procedures	Materiality & working papers
2022	Assertions & evidence	Internal control – inventory	AP & PPE procedures	Computerised env. & CAATs

From such a table:

• Identify topics that appear almost every year:
  • Internal control (cash, purchases, inventory).
  • Evidence/procedures for at least one balance.
  • Theory on risk/materiality or documentation.
• Examine how topics rotate:
  • If cash internal controls came up in 2021, purchases or inventory might be tested next.
  • But lecturers can repeat topics in different forms, so don’t gamble by ignoring prior topics.

3.5 Common Pitfalls Seen in Marking Memos

Official marking memos and markers’ reports (where available) often complain about:

1. Lack of structure:

   • Students write in long paragraphs with no clear bullet points or headings.
   • Markers often allocate marks per point; bullet lists make it easier for them to see each point.

2. Repeating the scenario instead of analysing it:

   • Students copy sentences from the question but don’t explain why it is a strength/weakness or what to recommend.

3. Vague recommendations:

   • Saying “the company must improve internal control” is not enough.
   • Recommendations must be specific, practical, and linked to the weakness.

4. Not reading the full requirement:

   • E.g. The question says “identify AND explain AND recommend” but the student only identifies.

5. Insufficient application:

   • Students write textbook theory without referring to the scenario of the CUT question (e.g. the specific company given).

Practice with past papers and marking memos helps you see the level of detail expected and how to phrase answers concisely yet clearly, which is crucial for modules like AUD20AB, AUE2602, and similar.

4. Core Exam Topics Illustrated with Past-Paper-Style Examples

This section focuses on big recurring topics in AUD20AB and gives example questions similar to those that appear in CUT and Unisa AUE2602 past papers, together with model answer structures.

4.1 Internal Control over Cash Receipts and Payments

4.1.1 Typical Exam Scenario

Example scenario (adapted to CUT AUD20AB style):

You are the auditor of Bloem Furniture Traders (Pty) Ltd, a medium-sized retailer in Bloemfontein. The company’s cash receipts and payments procedures are summarised below:

• Cashiers receive cash and card payments from customers and record transactions in the cash register. At the end of the day, the cashier prepares the cash summary and counts the cash on hand.
• The cashier then records the total in the cash receipts journal and prepares the bank deposit slip.
• The same cashier deposits the cash at the bank the next morning.
• The bookkeeper compares the cash receipts journal totals to the bank statement monthly, but no independent review is performed.
• For cash payments, the bookkeeper prepares cheques, signs them, and posts the payments to the cash payments journal and general ledger.

Typical requirement:

(a) Identify and explain SIX weaknesses in the internal control over cash receipts and payments at Bloem Furniture Traders (Pty) Ltd. (12 marks)

(b) For each weakness identified in (a), recommend a practical internal control measure to improve the system. (12 marks)

Total: 24 marks.

4.1.2 Answer Structure and Key Points

For part (a), you would:

1. Identify a weakness.
2. Explain why it is a problem (what risk arises).

For part (b), you propose a specific control.

Example weakness and recommendation:

Weakness 1
The cashier both receives cash from customers, prepares the daily cash summary, records totals in the cash receipts journal, and prepares the bank deposit slip. This is a breakdown in segregation of duties, as the same person handles cash and records it, increasing the risk of misappropriation of cash and manipulation of records.

Recommendation 1
Segregate duties:

• Cashiers should only receive cash and issue receipts.
• A separate person (e.g. supervisor) should prepare and verify the cash summary and deposit slip, and the accounting staff should record transactions in the cash receipts journal. Supervisory checks and daily cash count sign-off should be required.

Repeat this pattern for each weakness/control pair, e.g.:

• Same cashier doing the bank deposit (risk of skimming).
• Only monthly comparison between cash receipts journal and bank statements (too infrequent).
• Bookkeeper signing cheques (no proper authorisation).
• No independent review of bank reconciliations.
• No pre-numbering or control over receipts or deposit slips.

Focus on segregation of duties, independent review, documentation (pre-numbered documents), and reconciliations – these are always high marks.

4.2 Internal Control over Purchases and Creditors

4.2.1 Typical Exam Scenario

Example (mirroring CUT and Unisa-style):

You are auditing Mangaung Wholesale Supplies (Pty) Ltd. The company’s purchases and creditors system operates as follows:

• Department managers verbally order goods from suppliers. No official purchase requisition or order is used.
• When goods are delivered, the receiving clerk counts the goods and sends the supplier’s delivery note directly to the accounts department. No goods received note (GRN) is prepared.
• The accounts clerk matches supplier invoices to delivery notes only and posts them to the creditors ledger.
• Month-end supplier statements are usually ignored unless a supplier complains.

Required:

(a) Identify and explain FIVE weaknesses in the purchases and creditors system. (10 marks)
(b) Recommend a suitable control for each weakness identified. (10 marks)

4.2.2 Answer Approach

Internal control over purchases aims to ensure:

• Purchases are authorised, valid, accurate, complete, and recorded in the correct period.
• Liabilities are not understated or overstated.

For each weakness:

• Link to control objective(s).
• Provide a specific control.

Example:

Weakness
Department managers place verbal orders with suppliers. There is no formal purchase requisition or purchase order. This may lead to unauthorised purchases, purchase of goods not needed, or personal purchases charged to the company.

Recommendation
Implement a pre-numbered purchase requisition form to be completed and authorised by the department head. The purchasing department should then issue a pre-numbered purchase order approved by management. Only official purchase orders should be accepted by suppliers.

Other weaknesses likely:

• No GRN; reliance solely on supplier delivery notes (risk: fictitious or incorrect deliveries).
• Inadequate 3-way match (order, GRN, invoice).
• Ignoring supplier statements (lack of reconciliation; risk of unrecorded liabilities or disputes).
• Lack of segregation between ordering, receiving, and recording.

4.3 Audit Evidence and Procedures: Inventory

Inventory is another classic topic.

4.3.1 Typical Exam Requirement

Example requirement adapted to CUT:

(a) Explain why attendance at the client’s inventory count is important for the auditor. (6 marks)
(b) List and explain SIX audit procedures the auditor should perform during attendance at the client’s inventory count. (12 marks)
(c) Describe FOUR substantive procedures the auditor should perform after year-end on the inventory balance. (8 marks)

Total: 26 marks.

4.3.2 Core Points for Part (a): Importance of Attendance

Reasons include:

• To obtain audit evidence regarding existence and condition of inventory.
• To evaluate the client’s counting procedures and instructions.
• To perform test counts to verify the reliability of the count.
• To observe whether there is adequate control over inventory (e.g. preventing movement during the count).
• To identify obsolete, damaged, or slow-moving stock (for valuation issues).
• To ensure that cut-off between current and next financial year is properly observed.

Each reason can be expanded slightly in exams.

4.3.3 Procedures During the Count (Part b)

Common procedures include:

1. Review the client’s stock-count instructions and discuss them with management and count supervisors.
2. Observe the performance of count teams to ensure instructions are followed (no movement in/out of stores).
3. Perform test counts:
   • From floor to count sheets (existence).
   • From count sheets to floor (completeness).
4. Inspect the condition of inventory (obsolescence, damage).
5. Check that all inventory items are count-tagged or crossed off to prevent double counting.
6. Record your own test counts and details in working papers for follow-up.

Each point must be more than one word; an exam answer could have one sentence per procedure.

4.3.4 Substantive Procedures After Year-End (Part c)

Examples:

• Reconcile the final inventory listing to the general ledger figure.
• Trace selected items from the inventory listing to supporting documents (e.g. purchase invoices) to verify cost.
• Perform analytical procedures: compare gross profit % with prior years.
• Test cut-off by examining goods received notes (GRNs) and dispatch notes around year-end to ensure correct period.
• Evaluate provisions for obsolete or slow-moving inventory by reviewing aging reports, sales after year-end, and management’s policies.

These procedures test multiple assertions: existence, completeness, valuation, cut-off, accuracy.

4.4 Audit Procedures for Trade Receivables and Revenue

Receivables and revenue are high-risk areas in many audits and frequently appear in exam questions.

4.4.1 Example Question

You are the auditor of Free State Electronics (Pty) Ltd, a wholesaler that sells products on credit. At year-end, the trade receivables balance is material.
Required:
(a) List and explain EIGHT substantive procedures you would perform on the trade receivables balance at year-end. (16 marks)
(b) Indicate for each procedure which audit assertion it addresses. (8 marks)

4.4.2 Example Procedures Linked to Assertions

1. Obtain an aged analysis of trade receivables and compare total to the trial balance.

   • Assertion: completeness, accuracy.

2. Select a sample of balances and send direct confirmations (positive or negative, depending on risk).

   • Assertion: existence, rights, accuracy.

3. For non-responses to confirmations, perform alternative procedures:

   • Inspect subsequent cash receipts from the debtor.
   • Inspect sales invoices and delivery notes.
   • Assertion: existence, accuracy.

4. Review the aged analysis and discuss long-outstanding accounts with management to assess the adequacy of the allowance for doubtful debts.

   • Assertion: valuation, allocation.

5. Perform cut-off tests:

   • Select sales transactions recorded just before and just after year-end and inspect documentation (orders, delivery notes) to ensure they are recorded in the correct period.
   • Assertion: cut-off, occurrence.

6. Perform analytical procedures:

   • Compare days’ sales outstanding, receivables turnover ratio to prior year and industry averages.
   • Assertion: overall reasonableness (completeness, valuation).

7. Check whether any receivables are pledged as security, or whether there are recourse agreements, by inquiring from management and reviewing bank confirmations.

   • Assertion: rights and obligations, presentation and disclosure.

8. Test casting and cross-casting of the receivables listing and tie totals to the general ledger.

   • Assertion: accuracy, completeness.

In the exam, you must clearly explain each procedure (what you do and why), and clearly state the assertion, such as “existence”, “completeness”, etc.

4.5 Planning, Risk Assessment, and Materiality

4.5.1 Example Planning Question

You have recently been appointed as the auditor of Welkom Manufacturing (Pty) Ltd, a new client in the textile industry.
Required:
(a) Discuss FIVE matters you would consider in obtaining an understanding of the client’s business and environment during the planning phase. (10 marks)
(b) Explain how you would determine an appropriate level of materiality for the financial statements as a whole. (6 marks)
(c) List FOUR examples of inherent risk factors that may be relevant for Welkom Manufacturing (Pty) Ltd. (4 marks)

Total: 20 marks.

4.5.2 Model Answer Pointers

(a) Matters to consider in understanding the business

Examples:

• Nature of operations: products, services, main customers, suppliers.
• Industry conditions: competition, economic trends, regulatory environment.
• Ownership and governance: structure, related parties, board and audit committee.
• Accounting policies: complex areas, estimates (e.g. inventory valuation, depreciation).
• Internal control environment: management philosophy, HR policies, IT systems.

You would link each to why it matters for risk identification.

(b) Determining materiality

Discuss:

• Choosing an appropriate benchmark: profit before tax, total revenue, total assets, equity.
• Applying a percentage (e.g. 5–10% of profit before tax for profit-focused entities; 1–2% of revenue or assets where profit is volatile).
• Considering qualitative factors:
  • User needs (lenders, shareholders).
  • Whether small misstatements could be material by nature (e.g. fraud, related-party transactions).

(c) Inherent risk factors

For a manufacturing client:

• Complex inventory valuation (raw materials, WIP, finished goods).
• Risk of obsolete inventory due to style or technology changes.
• Significant estimates (warranty provisions, impairment of assets).
• Possible environmental or legal liabilities (waste, labour laws).

Linking this to planning helps anchor your answers in a more scenario-based manner.

5. Step-by-Step Study Strategy for AUD20AB Using Past Papers and Memos

5.1 Building a Master Topic List Aligned with CUT and Other SA Modules

Start by building a topic matrix, aligning AUD20AB topics with Unisa AUE2602/AUE1601 and other courses for cross-practice. For example:

CUT AUD20AB Topic	Related Unisa Module & Topic
Audit process & planning	AUE2602 – Planning and risk
Internal control – sales & debtors	AUE2602 – Revenue and receivables cycle
Internal control – purchases & pay.	AUE1601/AUE2602 – Purchases and creditors
Internal control – cash	AUE2602 – Cash and bank
Inventory & stock counts	AUE2602/AUE3702 – Inventory
Audit evidence & assertions	AUE1601 – Audit evidence
Working papers & documentation	AUE1601 – Documentation and completion
Computerised environment & CAATs	AUE2601 – Computer-assisted audit techniques

Use this matrix to plan which past papers (from CUT and Unisa) you will use for each topic.

5.2 Weekly Study Plan Template (8–10 Weeks)

Below is an example 8-week framework leading up to an AUD20AB exam:

Week 1–2: Foundations and Theory

• Re-read CUT AUD20AB study guide and prescribed chapters on:
  • Audit process and planning.
  • Audit risk and materiality.
  • Audit evidence and assertions.
• Attempt 1–2 past-paper theory questions per day (e.g. definitions, explanations).
• Summarise common theoretical definitions in your own words:
  • Audit risk, inherent risk, control risk, detection risk.
  • Materiality.
  • Internal control and its components.
  • Types of audit evidence.

Week 3–4: Internal Control Cycles

• Focus: Cash, sales and receivables, purchases and creditors.
• For each cycle:
  1. Prepare a summary of key control objectives.
  2. List typical strengths and weaknesses.
  3. Review 3–4 past exam questions per cycle (from CUT and Unisa if available).
• Answer at least one long internal control question under timed conditions each week.

Week 5: Inventory and Stock Counts

• Study:
  • Inventory control systems.
  • Stock count attendance procedures.
  • Valuation issues: cost vs NRV, obsolescence.
• Practice:
  • Past-paper questions on inventory internal control.
  • Written procedures for attendance at the count (practical bullet lists).
• Prepare a stock-count checklist summarising procedures pre-count, during, and post-count.

Week 6: Substantive Procedures for Key Balances

• Focus: Trade receivables, trade payables, bank, PPE (property, plant, equipment).
• Compile a template table for each balance showing:
  • Assertions.
  • Substantive procedures.
• Use Unisa AUE2602/AUE3702-style questions to practice.

Week 7: Integrated Case Studies and Revision

• Choose 2–3 past AUD20AB full exam papers (or combined from multiple years).
• Simulate exam conditions:
  • Three hours; no notes.
• Mark your own answers using memos.
• Note weak areas and revise targeted topics.

Week 8: Final Polishing and Exam Technique

• Re-do difficult questions.
• Memorise key structures:
  • Internal control answers (weakness + explanation + recommendation).
  • Inventory and receivables procedures.
• Prepare quick-reference summaries:
  • One-page sheet per major topic.

5.3 Creating Your Own AUD20AB Summary Notes from Past Papers

Rather than passively reading memos, convert them into your own notes:

1. Topic-based compilation:

   • For internal control, list all weaknesses and recommendations from multiple past papers under headings: cash, purchases, inventory, etc.
   • For procedures, list them per balance (inventory, receivables, payables, cash, fixed assets).

2. Keyword consolidation:

   • Identify phrases that appear frequently in memos (e.g. “segregation of duties”, “independent review”, “pre-numbered documents”, “bank reconciliation”).

3. Structure patterns:

   • Note how model answers often start:
     • “The weakness is that…” followed by consequence.
     • “The recommendation is that…” followed by specific action.

Over time, you develop a mental template to answer common question types quickly and consistently with what markers expect.

5.4 Integrating Memos Without Over-Reliance

While memos are critical, there is a risk of memorising rather than learning:

• After you review a memo, close it and:
  • Write your own version of the answer from memory.
  • Compare again and adjust.
• Change the scenario slightly for self-practice:
  • Different company name, or different industry.
  • Same control principles should still apply.

Try to teach a peer an answer format without looking at the memo; teaching reinforces understanding.

5.5 Practical Exam-Day Checklist

On the day of the AUD20AB exam:

• Bring:
  • Student card.
  • Multiple pens, ruler, highlighter.
  • Watch (if allowed) for time management.
• Immediately on receiving the paper:
  • Check that all pages are present.
  • Briefly scan all questions.
  • Allocate time per question based on marks.
• While answering:
  • Use headings and bullet points; markers appreciate clear structure.
  • Underline key parts of the question in your mind (e.g. “recommend”, “list”, “explain”).
  • Ensure you answer all sub-parts.
• If stuck:
  • Move to another question and come back later; partial answers often gain significant marks.
• Before finishing:
  • Quickly check your answers:
    • Have you addressed all requirements?
    • Are there any unfinished bullet lists you can add points to?

By focusing on the patterns in AUD20AB past papers and memos, practicing scenario-based internal control and procedures questions, and aligning your study with similar modules (such as Unisa’s AUE2602 and other South African Auditing 2 modules), you dramatically improve your chances of success in Central University of Technology’s AUD20AB: Auditing 2 exam. The key is not just to memorise but to understand why controls and procedures exist, and to apply that understanding to diverse case-study scenarios similar to those used at CUT and across the South African university system.