ACU foreclosed on a large loan and sold the land held as collateral. One effect of...
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ACU foreclosed on a large loan and sold the land held as collateral. One effect of this sale was to depress the land prices in the surrounding area. ACU still maintains a high inventory of land received from past foreclosures but has decided to hold onto this land for fear of depressing land prices further. • As a result of the depressed state of the local economy, provisions have recently been made to allow some customers to repay their loans with grains (i.e., oats and barley) instead of cash. Although such payments are not a common practice, Ted has approved these transactions on an exception basis. Even though the economy is depressed, Ted believes this will turn around, and loans will be collected over the long term. Therefore, he has instructed Sheila Meigs, Loan Manager, not to write off any significant loans as loan balances. ● Tasks: • Define inherent risk and perform an inherent risk assessment for ACU. Perform a control risk assessment • Conclude on the overall risk of material misstatement • How will your audit risk conclusion impact the audit strategy? ACU foreclosed on a large loan and sold the land held as collateral. One effect of this sale was to depress the land prices in the surrounding area. ACU still maintains a high inventory of land received from past foreclosures but has decided to hold onto this land for fear of depressing land prices further. • As a result of the depressed state of the local economy, provisions have recently been made to allow some customers to repay their loans with grains (i.e., oats and barley) instead of cash. Although such payments are not a common practice, Ted has approved these transactions on an exception basis. Even though the economy is depressed, Ted believes this will turn around, and loans will be collected over the long term. Therefore, he has instructed Sheila Meigs, Loan Manager, not to write off any significant loans as loan balances. ● Tasks: • Define inherent risk and perform an inherent risk assessment for ACU. Perform a control risk assessment • Conclude on the overall risk of material misstatement • How will your audit risk conclusion impact the audit strategy?
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1 Inherent risk refers to the level of risk that exists in an organizations financial statements or transactions without considering the impact of internal controls It is the susceptibility of financi... View the full answer
Related Book For
Auditing a business risk appraoch
ISBN: 978-0324375589
6th Edition
Authors: larry e. rittenberg, bradley j. schwieger, karla m. johnston
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