You are the audit manager in charge of GSK Sdn. Bhd., a company which is involve in supplying medical equipment for the elderly people. In planning the audit for the year ended 30 September 2021, the following information was made available to you. GSK Sdn. Bhd. has supplied the medical equipment to both private and government hospitals on credit terms. Due to economic downturn, GSK has been suffering the increasing level of bad debts as collections from the government are relatively slow. The management of plans to expand its business overseas, particularly in Singapore and Indonesia. As part of the plan, the management also looking into the upgrading of its accounting system from manual to computerized system. This plan will reduce the staff cost substantially. However, GSK has trade receivables balance that is material to the financial statements.

Required:

1. (a) From the information given, explain risks associated with the audit of GSK Sdn. Bhd.

2. Explain Type error 1 and Type error 2 that could be happened during finalising audit issuance decision making.

Answer rating: 100% (QA)

Answer 1 Detection risks This means that the auditor fails to sight the misstatements and errors within the companys budget and as a result they issue a wrong opinion on those statements As associate ... View the full answer