Address the following six areas for Abilene Oil and Gas Ltd (ASX code: ABL), Sector: Energy, for your audit team.

1. General and industry-specific economic trends and conditions
2. Competitive environment
3. Product, customer and supplier information
4. Technological advances and the effect of the internet
5. Laws and regulatory requirements.
6. Other area

Research Abilene Oil and Gas sector and report back to your audit partner. Your report will form part of the overall understanding of client’s structure and its environment, which will help you plan for the financial report audit of this client.

You should concentrate your research on providing findings from those areas that have a financial reporting impact and are considered probable given your client’s operations. In conducting your research, you should consider the following key market forces, as they relate to your client’s operations.

From your Understanding of the Abilene Oil and Gas Ltd , identify one(1) specific account balance (not account classifications!) that you consider at significant risk of material misstatement. For your chosen account balance:

a) Explain why the account balance is at significant risk of material misstatement

b) Explain one, key assertion at risk of not being valid

c) Detail one (1) relevant substantive audit procedure to address the assertion at risk as identified in b) above

d) Detail one (1) relevant practical internal control that would mitigate the risk in relation to the assertion at risk as identified in b) above.

Answer rating: 100% (QA)

a The account balance that is most at risk of material misstatement is the companys oil and gas reserves This is because estimating the size of oil and gas reserves is a complex and subjective process ... View the full answer