Lightning Ltd distributes and supplies electrical appliances. The company is an ongoing client of your audit firm. From a discussion with the General Manager during the planning of the audit, you have ascertained the following:

(i) During the year, several members of the board of directors retired and were replaced by prominent businesspeople previously associated, but not directly connected, with the company.

(ii) The company has experienced considerable staff turnover in the accounts payable department, including the resignation of the manager early in the year. This has created some delays in the processing of payments.

(iii) The company plans to upgrade its general ledger reporting with a new software package. The conversion is planned for three months before financial year end.

Required:

For each situation (i) to (iii) above.

(a) State the effect on Inherent Risk or Control Risk. (3 marks)

(b) Provide an explanation for your answer in part (a). (6 marks)

(c) Briefly discuss how the situation will affect your overall plan for the expected scope and conduct of the audit. (6 marks)