Reference no: EM133012063

Question - a) You are an audit senior at an auditing firm in Victoria. The firm has recently won the audit of a small dairy farm located in Warrnambool named Milky-Bar Pty Ltd (Milky-Bar). You have been assigned to the audit. The audit partner in the planning meeting tells you not to worry about the controls because the firm is quite small. Reviewing the audit program for Milky-Bar you notice that the audit program relies mostly on substantive procedures.

Discuss the expected levels of control risk and detection risk you would expect to see in the Audit Program for Milky-Bar.

b) You are the auditor of MasterFood. As a result of your audit work, you discover that MasterFood is currently trying to raise finance to fund operating activities. You believe that if the finance is not received, there is significant doubt over the going concern status of MasterFood. You conclude that the going concern assumption is appropriate, but you recommend that the financial statements should contain a note disclosing the cash flow problems faced by the company, a description of the finance being sought, and an evaluation of the going concern status of the company. The directors do not wish to include the note in the financial statements.

Explain the audit opinion which will be issued if:

(i) The directors refuse to include the disclosure note.

(ii) The directors agree to include the disclosure note.