Michael is a senior auditor at Inder Auditing firm. Michael is planning to audit the sales...

 

 

 

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Michael is a senior auditor at Inder Auditing firm. Michael is planning to audit the sales of ABC Ltd, a furniture manufacturing company. In a discussion with senior management of ABC Ltd Michael gathered the following information about ABC Ltd: • There is high staff turnover • The general manager is a very powerful person • ABC Ltd has a very complex business structure • No authorisation is made to purchase orders sent to the suppliers of ABC Ltd Required Based on the above information 1. What is the risk involved in auditing ABC Ltd? (1 mark) 2. What is the level of Detection Risk Michael should set to audit the sales of ABC Ltd? (1 mark) 3. What is the materiality level Michael should set for the sales transactions of ABC Ltd? (1 mark) 4. What will be the appropriate audit strategy Michael should adopt for auditing the sales transactions of ABC Ltd? (1 mark) 5. What is the level of audit evidence Michael should collect in auditing the sales transactions of ABC Ltd? (1 mark) Below are five situations in the context of auditing the financial report of a client Situation Type of audit report 1. Auditor believes that the financial report figures are true and fair, however, there is a need to stress on material acquisition transaction of Property, Plant, and Equipment. 2. Auditor was unable to collect information about inventory stored in remote warehouses of the client. 3. Auditor believes that the financial report has several material misstatement and client management refused to adjust material misstatements 4. Auditor believes that the client has followed accounting standards, legislative requirements, and that the figures in the financial report are true and fair 5. Auditor believes that inventory has misstatement, but there are no any other material misstatements in the financial report Required State the appropriate type of audit report auditor would issue in each of the five situations above. Wri: your answer in the column titled Type of audit report Michael is a senior auditor at Inder Auditing firm. Michael is planning to audit the sales of ABC Ltd, a furniture manufacturing company. In a discussion with senior management of ABC Ltd Michael gathered the following information about ABC Ltd: • There is high staff turnover • The general manager is a very powerful person • ABC Ltd has a very complex business structure • No authorisation is made to purchase orders sent to the suppliers of ABC Ltd Required Based on the above information 1. What is the risk involved in auditing ABC Ltd? (1 mark) 2. What is the level of Detection Risk Michael should set to audit the sales of ABC Ltd? (1 mark) 3. What is the materiality level Michael should set for the sales transactions of ABC Ltd? (1 mark) 4. What will be the appropriate audit strategy Michael should adopt for auditing the sales transactions of ABC Ltd? (1 mark) 5. What is the level of audit evidence Michael should collect in auditing the sales transactions of ABC Ltd? (1 mark) Below are five situations in the context of auditing the financial report of a client Situation Type of audit report 1. Auditor believes that the financial report figures are true and fair, however, there is a need to stress on material acquisition transaction of Property, Plant, and Equipment. 2. Auditor was unable to collect information about inventory stored in remote warehouses of the client. 3. Auditor believes that the financial report has several material misstatement and client management refused to adjust material misstatements 4. Auditor believes that the client has followed accounting standards, legislative requirements, and that the figures in the financial report are true and fair 5. Auditor believes that inventory has misstatement, but there are no any other material misstatements in the financial report Required State the appropriate type of audit report auditor would issue in each of the five situations above. Wri: your answer in the column titled Type of audit report

Answer rating: 100% (QA)

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