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For each of the following situations, describe how risk of material misstatement should be assessed and what effect the assessment will have on detection risk.
(i) Johnson is a fast-growing trucking company. The company is publicly held, but Ivan Johnson and his sons control 55% of the shares. Mr Johnson is Chairman of the Board and Chief Executive Officer (CEO). He personally makes all major decisions with little consultation with the Board of Directors. Most of the directors, however, are either members of the Johnson family or long-standing friends. The board basically rubber-stamps Mr Johnson's decisions.
(ii) The Focus Bank has been your client for the past two years. During that period, you have had numerous arguments with the president and the controller over a number of accounting issues. The major issue is related to the bank's reserves for loan losses and the value of collateral. Your prior audits have indicated that a significant adjustment is required each year to the loan loss reserves.
Action if Management Refuses to provide Representations Whether management rejects to provide a representation which the auditor considers compulsory, this constitutes a scope
In June 2004, Feltex Carpets Limited raised NZ $254 million in an initial public offering. Twenty seven months later the company was in receivership, its share price having collaps
For each of the following independent situations, state whether you agree or disagree, and briefly explain your answer. (a) Materiality is used only at the planning stage of the
list and explain four factors that influence the auditor''s judgement regarding the sufficiency if the evidence obtain
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Assessment tasks: This assignment requires you to revisit the case of the collapse of US energy giant Enron Ltd. Your revisit starts with a reading of the excerpts from memos
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The core principles of financial internal control are explained here: accounting and financial operations can be separated and the main purpose is the handling of cash and the copy
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