Reference no: EM132762788

Question: You are auditing Glebe Pty Ltd (Glebe), a fashion wholesaler that focuses on high-quality women's evening wear. This is the fourth year you have audited Glebe. While the company has in place some excellent systems, some aspects of the internal controls over purchases have been deficient. Consequently, you have always found it necessary to pay particular attention to auditing the ending balance of accounts payable. In the past year, Glebe's financial controller undertook a series of hedging transactions in order to smooth the impact of foreign currency fluctuations on the value of inventory. To facilitate this, Glebe invested in new accounting software. Also during the past twelve months, Glebe expanded its product range to include the latest range of children's casual wear. Much of this product range is in the lower price-bracket.

Required: Identify three inherent risks that an auditor would take into account at the planning stage of the audit of Glebe. In your answer state the following:

(i) The facts that suggest there is an inherent risk.

(ii) The nature of the risk (e.g. management experience, knowledge and changes during the period).

(iii) The level at which the risk arises (e.g. financial report or assertion).