You are undertaking the audit of Geneva Shoes, a leather shoes retailer which has 20 stores in Sydney and Melbourne. During the audit process, the following information is obtained:

• The availability and generous return & refund policy of competitor products on low-price internet shopping sites have resulted in a smaller market share of Geneva Shoes.
• The commission that salespersons receive is based on gross sales volume. To meet sales targets, some salespersons reduced the sales price by 30% without authorization.

Required:

Explain the impact of the above issues on:

(1) your assessment of Geneva Shoes’ inherent risk and control risk with explanations.

(2) the appropriate level of detection risk and the impact this has on the audit strategy.

Answer rating: 100% (QA)

The first issue affects inherent risk and control risk as it indicates that there is a risk that Gen... View the full answer