Reference no: EM132634949

Question - Bruny Island Dairy is a boutique cheese maker on Bruny Island. Over the years, the business has grown firstly by supplying local retailers, and then through exports. In addition, there is a 'farm-gate' shop and café located next to the main processing plant on Bruny Island, serving tourists who also visit the other specialist food and wine businesses in the region. Quality control over the cheese manufacturing process and storage of raw materials and finished products at Bruny Island Dairy is extremely high. All members of the business are committed to high product quality because any poor food handling practices which could result in a drop in cheese quality, failed health and safety inspections, or contamination of the products which would ruin the business very quickly. The company has managed to maintain export sales throughout the COVID-19 pandemic. However, revenue from tourists visiting the island has dropped off dramatically. The company has secured government assistance.

The export arm has been built up to become the largest revenue earner for the business by the younger of the two sisters who have run Bruny Island Dairy since it was established. Jane Langley has a natural flair for sales and marketing, but is not so good at completing the associated detailed paperwork. Some of the export deals have been poorly documented and Jane often gives discounts to some customers without consulting her older sister, Melinda, or informing the sales department. Consequently, there are often disputes about invoices and Jane makes frequent adjustments to debtor accounts using credit notes when clients complain about their statements. Jane sometimes falls behind in responding to customer complaints because she is very busy juggling the demands of making export sales and running her other business, Café Consulting, which manages casual staff working at the café business at Bruny Island Dairy.

Required -

Identify the factors that would affect the preliminary assessment of inherent risk and control risk at Bruny Island Dairy.

Explain how these factors would influence your choice between the predominantly substantive approach (where planned detection risk is set at low-medium) and the lower assessed level of control risk approach (where planned detection risk is set at medium -high) for sales, inventory and debtors.