Sitner Plc is a software development and computer manufacturing company. The company has grown considerably in the last six years; expanding to have more than twenty factories across the globe, including the UK, and with operations in more than fifty locations worldwide. Its customer base includes retailers as well as individuals, to whom direct sales are made through their website. The following recent developments have come to light: 

1) In April 2020, the Board of Directors appointed a new CEO and an acting FD to replace the former CEO and FD, who were asked to step down by the Board, due to on-going fraud investigations.

 2) For the last nine months the accounts department has experienced a high turnover of staff, with most ex-staff joining the company's main competitor, E-tech Plc, who offer more attractive pay packages. 

3) One of Sitner Plc's other competitors, Maxy Limited, went into receivership in March 2019 due to the increasing pressure on margins in the industry as well as changing market conditions resulting from the economic crisis in Europe. 

Required:

 a) Define the terms 'audit risk' and 'business risk'.

b) Highlight the business risks in the scenario, and the actions management could take to mitigate the risks.

c) If your firm was newly appointed as the auditor of Sitner Plc, suggest what the key audit risks might be.

Answer rating: 100% (QA)

a Definitions of Audit Risk and Business Risk 1 Audit Risk Audit risk refers to the risk that an auditor expresses an inappropriate audit opinion on the financial statements It arises due to the possi... View the full answer