Reference no: EM132978154

Risk Assessment - The audit partner, Peter, along with all audit team members met with the CFO of Zebra, Zack Davis, virtually over Zoom. The following issues were discussed in the meeting:

Peter, asked permission from Zack Davis, to record the meeting for the purposes of their record. Zack Davis declined, adding he would prefer the audit team to take notes instead.

Peter agreed.

Zack Davis made it clear that the ASIC investigation is troubling particularly in the wake of the COVID crises, but also noted that the management team is confident that there will be no charges against the firm.

Sarah noted that the ASIC industry-wide investigation could have a 'contagious effect' on the share price of Zebra whether or not Zebra is charged, and that Mr. Davis should consider disclosing such potential effects to forewarn investors, and pre-empt future litigation risks.

Mr. Davis pushed back arguing that he, and the management team, are not too keen to speculate on future events that are difficult to quantify. He added that this is not necessary and is probably not in the best interest of all stakeholders.

Mr. Davis convincingly argued that the ongoing COVID crises, which clearly caused the firm's revenue to only increase 5% from last year, and the ASIC investigation are 'once in a lifetime' events. He added that 'it is the underlying economics of the firm rather than these one-off events that is informative to investors' decisions.

Mr. Davis further stated that 'let's not forget that, as Peter knows, we are a financially important client for you'. (Audit firm Auditing for 15 Years)

Required -

a) Identify and explain two (2) inherent risk factors which exist.

b) State the assertion affected by each risk identified.