Sheng Siong is one of Singapore's largest retailers with 64 stores located all across the island. Sheng
Question:
Sheng Siong is one of Singapore's largest retailers with 64 stores located all across the island. Sheng Siong's chain stores are designed to provide customers with both "wet and dry" shopping options ranging from a wide assortment of live, fresh and chilled produce, such as seafood, meat, fruits and vegetables to packaged, processed, frozen and/or preserved food products as well as general merchandise, including toiletries and essential household products. Over the past decade, Sheng Siong has begun developing a selection of housebrands to offer its customers quality alternatives to national brands at substantial savings. To date, Sheng Siong has over 1,500 products under 23 housebrands (Sheng Siong Group 2021). You are an audit manager in TYC LLP ("TYC"). TYC is an established professional accounting firm that provides audit, tax, and advisory services. For purposes of this assignment, assume that there is an impending change in the auditor of Sheng Siong, and TYC has been invited to tender for the financial statement audit of Sheng Siong. You have been tasked by the audit partner to conduct some research on Sheng Siong, and to generate a report that addresses the following questions:
Question 1 To your knowledge, the reason for the change in auditor is because Sheng Siong's predecessor auditor has chosen not to stand for election for another year. In other words, the predecessor auditor did not seek re-election. (a) Demonstrate four (4) possible reasons why an auditor may choose not to stand for re- election. Apply your discussion to the context of Sheng Siong wherever possible.
b) Your audit partner would like you to help come out an audit proposal for the tender. One of the items to be included in the audit proposal is the audit fees. Indicate four (4) factors that the audit firm would have to consider when setting the audit fees. Apply your discussion to the context of Sheng Siong wherever possible.
Question 2 After the submission of a proposal by your firm to become the auditor for Sheng Siong, Sheng Siong selected your firm, TYC, as its financial statements auditor. You are on the engagement team auditing Sheng Siong. Your team is at the stage of engagement planning. The auditor performs risk assessment procedures to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and assertion levels. This assists the auditor to design and implement responses to the assessed risks of material misstatement. As part of the risk assessment procedures, you have been tasked to perform some research on Sheng Siong, and generate a report for the partner that addresses the following questions: (a) Illustrate how Sheng Siong's organizational structure, ownership and governance are relevant in helping the auditor to identify risks of material misstatements in the financial statements. Indicate the resulting impact on audit risk. Illustrate with examples in the context of Sheng Siong wherever possible. You may organize your answers using the following:
Relevant aspects of Sheng Siong's organizational structure | How Sheng Siong's organizational structure impacts the risk of material misstatements at the financial statement level Indicate the resulting impact on audit risk |
Relevant aspects of Sheng Siong's ownership and governance | How Sheng Siong's ownership and governance impacts the risk of material misstatements at the financial statement level Indicate the resulting impact on audit risk |
(b) Illustrate how an understanding of Sheng Siong's business model, including the extent to which the business model integrates the use of IT, is relevant in helping the auditor to identify risks of material misstatements in the financial statements. Indicate the resulting impact on audit risk. Illustrate with examples in the context of Sheng Siong wherever possible. You may focus on the following aspects of Sheng Siong's business model, and organize your answers using the template below:
Sheng Siong's main products or services, and distribution methods | How it impacts the risk of material misstatements at the financial statement level Indicate the resulting impact on audit risk |
Sheng Siong's markets - geographical or demographic spheres, and parts of the value chain, in which it operates | How it impacts the risk of material misstatements at the financial statement level Indicate the resulting impact on audit risk |
Sheng Siong's key customers, employees and important suppliers of goods and services and why they are important to Sheng Siong's success | How it impacts the risk of material misstatements at the financial statement level Indicate the resulting impact on audit risk |
Sheng Siong's business or operating processes (e.g. investment, financing and operating processes) employed in performing its activities | How it impacts the risk of material misstatements at the financial statement level Indicate the resulting impact on audit risk |
Sheng Siong's resources (e.g. financial, human, intellectual, environmental and technological) that are necessary or important to its success | How it impacts the risk of material misstatements at the financial statement level Indicate the resulting impact on audit risk |
How Sheng Siong's business model integrates the use of IT | How it impacts the risk of material misstatements at the financial statement level Indicate the resulting impact on audit risk |
Question 3 Your engagement team needs to perform analytical procedures as part of the risk assessment procedures to assess the risk of material misstatement in Sheng Siong's financial statements. Analytical procedures consist of evaluations of financial information through analysis of plausible relationships among financial and non-financial data. Analytical procedures help identify inconsistencies, unusual transactions or events, and amounts, ratios, and trends that indicate matters that may have audit implications. Unusual or unexpected relationships that are identified may assist the auditor in identifying risks of material misstatement, especially risks of material misstatement due to fraud. Employ the following analytical procedures based on Sheng Siong's financial statements. To do so, you need to form expectations. Examples of sources you may refer to include, but are not limited to, the following: Prior period data Industry data Present the following in your report to the audit partner: (a) Analyse Sheng Siong's financial performance by performing trend analysis. What are the important insights that you as the auditor gain from this analysis?
(b) Analyse Sheng Siong's financial performance by performing ratio analysis. What are the important insights that you as the auditor gain from this analysis?
Question 4 Based on your analytical procedures performed in Question 3, choose three (3) transactions/account balances and: (a) Identify the impact on Sheng Siong's audit risk, and explain why. (b) Identify one (1) management assertion relating to each account balance/transaction that you identified which you as the auditor are most concerned about. Refer to SSA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment, paragraph A190 for the list of assertions made by management in the financial statements.
(c) Indicate one (1) audit procedure you will perform to test this assertion. Please state clearly where you obtain the information from Sheng Siong's annual report or other company information. You may use the following template to structure your answers:
Name the account/ transaction | (i) Identify the impact on Sheng Siong's audit risk, and explain why. | (ii) Management assertion relating to each account balance/ transaction | (iii) Audit procedure to test this assertion | |
1. | ||||
2. | ||||
3. |
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr