You are an auditor of Khan and Partners Chartered Accountants, a thriving mid-tier accounting firm. The firm recently expanded its clientele by taking on a new client named Apollo Electronics Ltd, a medium-sized company engaged in the production of various electronic products. Your audit engagement pertains to the financial year ending on 30^th June 2023.
  Apollo Electronics operates in a highly competitive industry where technological advancements and market demands change rapidly. During the audit planning phase, you have a discussion with Ethan Brown, the purchasing manager, and learn that the company heavily relies on purchasing critical electronic components from third-party suppliers. However, Apollo Electronics lacks an integrated purchasing system with these suppliers, and it predominantly uses spreadsheets and paper-based documentation for reordering for raw materials and components. 

In the financial year 2023, Apollo Electronics faced challenging market conditions, resulting in a 21% drop in sales volume. This decline has raised concerns among management and employees about the company's deteriorating performance. As a part of your risk assessment, you note that Apollo Electronics lacks comprehensive policies and procedures for handling customers returns and warranty claims. The audit team also discovered that employee could easily access the financial systems which contains company's sensitive data. 

 

Part A

Identify five risks for Apollo Electronic Ltd's financial statement? 

 Part B

Identify the specific accounts affected by the three risks and how they affect these accounts of Apollo Electronics Ltd. 

Answer rating: 100% (QA)

Part A Five Risks for Apollo Electronics Ltds Financial Statements 1 Revenue Decline Risk The significant drop in sales volume 21 during the financial year 2023 poses a risk to the revenue recognition ... View the full answer