Reference no: EM132829622

Michael Cheung has drafted an audit plan for a new client. The client is Countrywide Capers, a party rental business. Countrywide Capers earns 80 percent of its revenue from renting out tents, tables, dishes, cutlery, napkins, and table cloths. Michael's plan shows that audit time is divided to reflect this revenue pattern (that is, 80 percent of the audit time is spent on the rental business and 20 percent of the time is spent on the retail business). Michael believes that the significance of the revenue activities should be the only driver of the audit plan because the client has no related parties and has a simple, effective corporate governance structure.

What are some of the questions you would have for Michael before accepting his audit plan?

-What are the significant transactions and accounts?

-Are controls the same for both segments of the business?

-Have the controls been tested?

-Is there any going concern risk?

-What is the acceptable level of audit risk?

-What audit opinion will be issued?

-What work has been done to ensure there are no issues with the client's corporate governance structure?

-Is the risk of misstatement the same for both segments of the business?