**(a) Special steps involved in the verification of fees collected from students:**
Based on the principles of school audit and student fee verification, the following steps are to be performed:
1. **Verify Student Rolls against Fee Register**: Check names entered in the Students Fee Register for each month or term with the respective Class Registers showing the names of students on rolls. Test the amount of fees charged to ensure that demands against the students are properly raised and that there operates a system of internal check.
2. **Reconcile collections with Cash Book**: Verify fees received by comparing the counterfoils of receipts granted with the entries in the Cash Book, and trace the collections in the Fee Register to confirm that the revenue from this source has been duly accounted for.
3. **Analyze Arrears and Advances**: Total up the various columns of the Fees Register for each month or term to ascertain that fees paid in advance have been carried forward and that the arrears that are irrecoverable have been written off under the sanction of an appropriate authority (such as the Managing Committee).
4. **Scrutinize Admission Fees**: Check admission fees with admission slips signed by the head of the institution and confirm that the amount has been credited to a Capital Fund, unless the Managing Committee has taken a decision to the contrary.
5. **Verify Concessions and Free Studentships**: Ensure that free studentship and fee concessions have been granted by a person authorized to do so, in accordance with the Rules prepared by the Managing Committee.
6. **Check Fines and Other Charges**: Confirm that fines for late payment, absence, etc., have been either collected or remitted under proper authority.
7. **Verify Hostel Dues and Deposits**: Confirm that hostel dues were recovered before students' accounts were closed and their deposits of caution money refunded.
**(b) Audit duty and reporting requirements regarding unresolved prior period modification (Adverse Opinion on Debtors):**
Under **SA 710 (Comparative Information — Corresponding Figures and Comparative Financial Statements)**, since Oval Enterprises Limited (OEL) presents comparative financial statements, the auditor's duty is as follows:
1. **Unresolved Matter leading to Modification**: Since the prior period's financial statements contained an adverse opinion due to a misstatement in the evaluation and disclosure of debtors, and the matter remains unresolved, the auditor must modify the auditor's opinion on the current period's financial statements.
2. **Basis for Modification Paragraph**: In the Basis for Modification paragraph, the auditor must either:
(i) Refer to both the current period's figures and the corresponding figures in the description of the matter giving rise to the modification when the effects or possible effects of the matter on the current period's figures are material; or
(ii) In other cases, explain that the audit opinion has been modified because of the effects or possible effects of the unresolved matter on the comparability of the current period's figures and the corresponding figures.
3. **Opinion Paragraph**: The auditor's opinion must refer to each period for which financial statements are presented and on which an audit opinion is expressed.
4. **Predecessor Auditor Disclosure**: If the financial statements of the prior period were audited by a predecessor auditor, the auditor must state in an **Other Matter** paragraph:
(i) That the financial statements of the prior period were audited by a predecessor auditor;
(ii) The type of opinion expressed by the predecessor auditor and, if the opinion was modified, the reasons therefor; and
(iii) The date of that report.
**(c) Identification and explanation of the Fundamental Ethical Principles:**
1. **(i) Case 1 (Acting diligently in accordance with technical/professional standards)**:
- **Principle referred to**: **Professional Competence and Due Care**.
- **Explanation**: This principle requires a professional accountant to attain and maintain professional knowledge and skill at the level required to ensure that a client or employing organization receives competent professional service, based on current technical and professional standards and relevant legislation. Acting diligently means acting in accordance with the requirements of an assignment, carefully, thoroughly, and on a timely basis.
2. **(ii) Case 2 (Not knowingly associated with false/misleading statements)**:
- **Principle referred to**: **Integrity**.
- **Explanation**: This principle requires a professional accountant to be straightforward and honest in all professional and business relationships. Integrity implies fair dealing and truthfulness. Under this principle, a professional accountant must not knowingly be associated with reports, returns, communications, or other information where they believe the information contains a materially false or misleading statement, contains statements or information furnished recklessly, or omits or obscures information where such omission or obscurity would be misleading.
**OR (c) Audit tests in an automated environment and the role of professional judgment:**
1. **Four Types of Audit Tests commonly used in an automated setting**:
- **Inquiry**: Asking questions of management or others to obtain information. It is the most efficient test but provides the least persuasive audit evidence. Thus, inquiry alone is never sufficient and must be combined with other tests.
- **Observation**: Watching a process or procedure being performed by others. It provides evidence at a specific point in time but is limited.
- **Inspection**: Examining records, documents, or physical assets in paper, electronic, or other media.
- **Reperformance**: Independently executing procedures or controls that were originally performed as part of the entity's internal control. This is the most effective test and provides the strongest audit evidence, but is often the most time-consuming and least efficient.
2. **Selecting and Applying the Tests**:
- Generally, a combination of **Inquiry** and **Inspection** provides the most effective and efficient audit evidence.
- The determination of which test to apply, when, and in what combination is a matter of **professional judgment** and depends on factors such as:
- The assessed risk of material misstatement at the assertion level.
- The overall control environment and complexity of the IT systems.
- The desired level of audit evidence and assurance.
- The history of errors or control deficiencies.
- The specific assertions being addressed.
- The auditor must document the nature of the tests applied, their combination, and the rationale behind these decisions in the audit documentation.