You are engaged as an audit senior in the public accounting firm of Millie and Partners. As part of the planning process for the audit of Maxie Ltd for the financial year ended 30 June 2014, you requested the minutes of the Board of Directors meetings for the financial year and noted the following: Date of Meeting Extract from Board of Directors Meetings for the year 2013-14 1/9/2013 The board agreed that in order to attract new customers and therefore increase sales, any new customers from 1/9/2013 would receive three months credit before their debt becomes overdue, rather than the one month credit previously allowed. 1/11/2014 The board agreed that a new ‘bonus scheme’ would be implemented from 1/11/2013, which would provide directors with a 5% bonus on profits if they could exceed last year’s profit by 20%. 1/6/2014 The board agreed to revalue land and buildings upwards by 50% in the financial statements at 30/6/2014, in accordance with a property valuation undertaken at the company’s request. 

Required: 

Discuss the potential risk of each of the above items from the board of directors meetings and the impact each would have on your audit plan for 30 June 2014.

Answer rating: 100% (QA)

Required solution 1There exists the inherent risk of material misstatementdue to volume addendant er... View the full answer