Problem 1: The auditor of any entity adapts the audit approach to the circumstances of the entity. The characteristics of smaller entities may include:
(i) Concentration of ownership and management
(ii) Unsophisticated record keeping
(iii) Limited internal controls
problem1. Describe the nature and effect of each of the three characteristics listed above on the audit of small entities.
problem2. Discuss the arguments for and against of having an audit of small entities.
Problem 2: Banks commonly undertake a wide range of activities that have lots of audit implications. There are many audit-related matters that banks do not share with other commercial entities.
problem1. Identify four characteristics of banks that differ from commercial entities.
problem2. State four matters that require special audit considerations in the audit of the financial statements of banks.