Reference no: EM133233685
(a) The auditor has a responsibility to design audit procedures to obtain sufficient and appropriate evidence. There are various audit procedures for obtaining evidence, such as external confirmation.
Required Apart from external confirmation:
(i) State and explain FIVE procedures for obtaining evidence.
(ii) For each procedure, describe an example relevant to the audit of purchases and other expenses.
(b) KKD Air operates an airline business. The company's year end is 31 July 2020. You are the audit senior and you have started planning the audit. Your manager has asked you to have a meeting with the client and to identify any relevant audit risks so that the audit plan can be completed. From your meeting you ascertain the following: In order to expand their flight network, KKD Air will need to acquire more airplanes; they have placed orders for another six planes at an estimated total cost of £22m and the company is not sure whether these planes will be received by the year end. In addition, the company has spent an estimated £16.5m on refurbishing their existing planes.
To fund the expansion, KKD Air has applied for a loan of £27.5m. It has yet to hear from the bank as to whether it will lend them the money. The company receives bookings from travel agents as well as directly via their website. The travel agents are given a 90-day credit period to pay KKD Air, however, due to difficult trading conditions a number of the receivables are struggling to pay. The website was launched in 2019 and has consistently encountered difficulties with customer complaints that tickets have been booked and paid for online, but KKD Air has no record of them and hence has sold the seat to another customer. KKD Air used to sell tickets via a large call centre located near to their head office. However, in May they closed it down and made the large workforce redundant.
Required: Using the information provided, describe FIVE audit risks, and explain the auditor's response to each risk in planning the audit of KKD Air.