Manuke has drafted an audit plan for a new client. The client is Marquee Starshine, a party-hire business. Marquee Starshine earns 80 per cent of its revenue from hiring marquees, tables and chairs, lights and other party equipment and 20 per cent from sales of disposable crockery, cutlery, napkins and table cloths. Manuke’s plan shows that audit time is divided to reflect this revenue pattern (that is, 80 per cent of the audit time is spent on the hire business and 20 per cent of the time is spent on the retail business). Manuke believes that the significance of the revenue activities should be the only driver of the audit plan because the client has no related parties and a simple, effective corporate governance structure.
Required
List three (3) questions that you would ask Manuke before accepting his audit plan?
a) ________________________________________________________________
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b) ________________________________________________________________
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c) ________________________________________________________________
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Question 1

Preliminary analytical procedures are performed as part of the planning process to assist the auditor in gaining an understanding of the entity and its environment (ASA 315 ‘Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment’).
Required:
From the three rows of data shown below for Georgie Manufacturing Pty Ltd:
(a) what conclusions would you draw from the ratio analysis (i.e. interpret any movement in the ratio and discuss the audit risks that could be present); and
(b) what areas would you then emphasise in conducting the audit in relation to the risks identified in your conclusions.
Millicent Manufacturing Pty Ltd
2016 2015 2014 2013 Industry 2016
1. Inventory Turnover 3.40 3.21 4.66 5.64 4.88
2. Current Ratio 1.65 1.69 2.08 2.31 2.00
3. Days Sales in Receivables 99 86 90 62 60

a) Inventory Turnover
Conclusions:
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Audit Emphasis:
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(2 marks)
b) Current Ratio
Conclusions:
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Audit Emphasis:
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c) Days Sales in Receivables
Conclusions:
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Audit Emphasis:
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Answer rating: 100% (QA)

Q1 The three 3 questins tht we wuld sk Mnuke befre eting his udit ln re Is it rret t tke the revenue ttern s deiding the udit time beuse it uld be tht dissble rkery utlery nkins et ssesses higher vlum... View the full answer