Reference no: EM132721218

Question - Bellows Home Inspection is a private business that provides home inspection. It has been in business for 15 years and Ethan, the owner, is proud of their strong internal control system.

The business is showing a loss for the first time in five years. The business is very cyclical: the large majority of its sales occur when a home is purchased, so it is affected by the real estate market. It gets most of its business through Bellows Realty, a real estate broker company held by Ethan and his mother. Bellows Realty will directly purchase the home inspection from Bellows Home Inspection on behalf of its clients.

Bellows recently acquired a competitor, Home Guards Inc. To complete the purchase, it has received a significant loan from the bank. The bank will be a new user of Bellow's financial statements.

The accounting manager, however, has indicated that it has been difficult to integrate the operations of Home Guards because its internal controls over financial reporting were pretty much non-existent at the time of the acquisition.

Required - Identify four key audit issues in this company, and explain how these will affect your audit risk, using the audit risk model.