Risk in the audit plan, Classify the main account or group

Risk in the audit plan

Reference no: EM133402

Question :

BestSteel Ltd has been the biggest metal pressing machine manufacturer in Australia since 2005, when it introduced a machine with technologies few years more advanced than those provided by its competitors. From thereon, BestSteel has been driving out competitors out of the market by providing higher quality products at highly competitive prices. Thus, a new entrant to the industry has currently introduced its latest innovation.

Based on the competitor's advertisements, you are aware that the competitor's product is highly likely to be of enhanced quality than BestSteel's and due to their high end machinery, their production costs are expected to be significantly lower. BestSteel's management has predicted that to the competitor's product, their demand will drop by at least 40%.

2. You are currently appointed as the auditor for Sprinkles Ltd. The accountant of Sprinkles has been notorious for searching loopholes in the legislations in order to prepare its clients' financial statements look presentable as desired by the clients themselves. In the past few years, Sprinkles has always been required by the Australian Tax Office to give additional supporting information after the lodgement of its tax returns.

3. BPharm Ltd is a family-owned company operating chemist shops in Albany. Majority of the sales transactions are done in cash. BPharm is planning to expand to Walpole and Denmark. It is applying for a loan from the bank to get funding for the expansion. Before granting the loan, the bank needs BPharm to give them with the audited financial statement.

Required

(a) Identify and explain why the above situation represents a risk.

(b) By applying auditing knowledge, Classify the main account or group of accounts affected by this risk in the audit plan.

(c) Classify how the audit plan will be affected by the risks and recommend specific audit procedures to address these risks.

Reference no: EM133402

Questions Cloud

Questions on risc machine : Questions on RISC machine

Evaluate inventory costing method : Gladstone Company tracks the number of units purchased and sold all through each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system.

Produce a state transition diagram : Produce a state transition diagram

Distinguish between functional value and emotional value : Distinguish between functional value and emotional value. Illustrate with examples. (b) Discuss the importance of functional and emotional value in the creation of genuine customer relationships

Risk in the audit plan : Classify the main account or group of accounts affected by this risk in the audit plan.

Market segmentation : arket segmentation, consumer decision-making process, tourism and hospitality marketing, marketing research tool

Management accounting formats : Management accounting formats are identical for all companies

How to define the Escape Problem : How to define the Escape Problem

Determine and journalize the foreign exchange adjustments : Determine and journalize the foreign exchange adjustments for 2005, 2006 and 2007 for the Canadian subsidiary.

User Account

All Pages