Reference no: EM133105227

Question - ABC kids care Ltd (ABC) is listed on the Australian Securities Exchange. The company provides childcare services for pre-school children. ABC has undertaken significant expansion of its operations over the past two years. This strategy has resulted in the acquisition of a total of 400 new centres with childcare licences in Australia, New Zealand and the United Kingdom. The expansion strategy has been funded mainly from borrowings that have been sourced in both local and foreign currency. ABC's board consists of five directors: three non-executive directors, the CEO and CFO. None of the three nonexecutive directors have any formal qualifications or background in business. The board has expressed concern about the pace of expansion, due to ABC's accounting system failing to effectively integrate the acquired companies' complex information systems.

1) Explain inherent risk and why it is important to evaluate inherent risk as part of audit planning.

2) Provide the factors that influence inherent risk at the financial report level and the assertion level.

3) Based on the background information, identify four inherent risk factors for ABC and explain their impact on the financial report.