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number of years. Given their longstanding relationship, Earthy requested FPCA to undertake the assurance engagement over the sustainability report. FPCA had not performed this type of engagement before. Charlotte Ng, the engagement partner for Earthy’s financial statements audit, is keen to grow FPCA by diversifying into other assurance services. Given the assurance skills possessed by the partners and staff at FPCA, Charlotte is confident that the firm can perform this type of engagement, and therefore accepted the engagement.FPCA performed a number of procedures to obtain sufficient appropriate evidence for the assurance engagement, including:1. Conducting interviews with senior management and relevant staff at mining sites.2. Obtaining an understanding of the process for collecting and reporting the information within the sustainability report.3. Agreeing the information presented in the sustainability report to relevant underlying sources.After performing the engagement, FPCA issued its assurance report. The following is an extract from the report:ConclusionBased on the procedures performed, nothing has come to our attention that would lead us to believe that Earthy’s sustainability report for the year ended 31 December 20X6 is not, in all material respects, prepared and presented in accordance with the GRI G4 Sustainability Reporting Guidelines, as disclosed in the Earthy Sustainability Report 20X6.Required(a) Identify an issue related to the engagement acceptance. Advise two (2) alternative ways that FPCA could have resolved the issue.(3 marks)(b) With reference to Auditing and Assurance Standards, identify and explain the type of assurance engagement FPCA performed and the level of assurance provided.(3 marks)(c) Explain whether each of the three procedures above are appropriate for the engagement. Design one (1) additional procedure that FPCA could have performed.(5 marks)11 marksQuestion 4 continues, please turn over
Chartered Accountants Program Audit & AssuranceSupplementary examPage 11 of 11 Question 4 (cont.)Part B (9 marks)Earthy recently undertook a review of its administrative functions. As a result, in January 20X6, it outsourced the payroll function to a global payroll services firm, PayR. PayR uses a large international audit firm, SO Auditors (SOA), to provide assurance over its controls.You are an audit senior working for FPCA and you have been assigned to the financial statements audit of Earthy for the year ended 31 December 20X6. Your audit plan for payroll includes reliance on the operating effectiveness of controls. As part of the risk assessment procedures to obtain an understanding of the payroll services provided by PayR, you reviewed an auditor’s report issued by SOA. The following is an extract from SOA’s auditor’s report on the controls at PayR:OpinionOur opinion has been formed on the basis of the matters outlined in this report. The criteria we used in forming our opinion are those described in an earlier section of this report. In our opinion, in all material respects:(a) The description fairly presents PayR’s payroll system as it was designed and implemented as at 30 June 20X6.(b) The controls related to the control objectives stated in the description of the payroll system were suitably designed as at 30 June 20X6.Required(a) Identify the most appropriate Auditing and Assurance Standard relevant to each engagement performed by SOA and FPCA respectively. Justify your answer.(4 marks) (b) Explain why SOA’s auditor’s report does not provide sufficient appropriate evidence for you to be able to reduce the level of substantive testing for payroll in the audit of Earthy.(2 marks)(c) Outline three (3) alternative approaches that you could take to the audit of Earthy’s payroll.(3 marks)9 marksEnd of Question 4End of exam paper