MaxSecurity Limited (MaxSecurity) has been an audit client of Smith & Associates (S&A) for the past 15 years. MaxSecurity is based in Wollongong, where it manufactures high-tech armour-plated CHAPTER 1 Introduction and overview of audit and assurance 41 personnel carriers. MaxSecurity often has to go through a competitive market tender process to win large government contracts. Its main product, the small but powerful Terrain Master, is highly specialised and MaxSecurity does business only with nations that have a recognised, democratically elected government. MaxSecurity maintains a highly secure environment because of the sensitive and confidential nature of its vehicle designs and its clients. Clarke Field has been the engagement partner on the MaxSecurity audit for the last five years. Clarke is a specialist in auditing clients in the defence industry and intends to remain as review partner when the audit is rotated next year to a new partner (Sally Woodrow, who is to be promoted to partner to enable her to sign-off on the audit). The board of MaxSecurity is considering issuing half-yearly financial reports in addition to its fullyear financial reports and has approached the audit partner, Clarke Field, to discuss the possibility of engaging the firm to discuss the audit implications. Clarke suggests that S&A could review the halfyearly financial reports. MaxSecurity’s end of financial year is 30 June.

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Discuss the expectations gap that could exist for the audit of Max Security. Consider the existence of any special interests of the users of Max Security’s financial reports.