Dunks Holdings Ltd. (Dunks) is an importer of hardware goods and distributes the goods to hardware retailers
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Dunks' share price has fallen over the last year as doubt about its ability to grow its profits in the current year spreads. The CEO and other senior management have large bonuses linked to both share prices and company profitability, and there is a mood within the company that achieving sales and profit targets this year is vital to avoid job losses at the company.
You have been brought into the audit team for Dunks this year and given the responsibility for auditing Dunks' closing procedures. Dunks has a monthly reporting system for internal management, but you notice that the reports are being issued later in the following month this year than they were last year.
Required
(a) Explain why and how the circumstances described above could affect your risk assessment.
(b) How do you plan to audit Dunks' closing procedures? What potential errors would you be most interested in?
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