Consider each of the following independent situations, all of which apply to ongoing audits of your...

 

Transcribed Image Text:

Consider each of the following independent situations, all of which apply to ongoing audits of your clients for the year ending 30 June 2020. a) Future Ltd (Future) is a furniture manufacturer. Although demand for Future's products has been steady, increasing costs have put significant pressure on gross margins, which have fallen from 30% last year to 25% this year, based on the latest management monthly accounts. Net profit before tax is a key measure used by investors and Future has already had to revise down its profit forecast once in the current financial year. b) EasyMart Ltd.'s major competitor has decided to cease its current aggressive discounting and marketing campaign that it was waging to try and increase its market share. c) Technological developments have made 30% of the inventory on hand of Advanced Computing Ltd obsolete. REQUIRED For each of the independent situations described above, outline the impact, if any, on inherent risk. [Answer here] Consider each of the following independent situations, all of which apply to ongoing audits of your clients for the year ending 30 June 2020. a) Future Ltd (Future) is a furniture manufacturer. Although demand for Future's products has been steady, increasing costs have put significant pressure on gross margins, which have fallen from 30% last year to 25% this year, based on the latest management monthly accounts. Net profit before tax is a key measure used by investors and Future has already had to revise down its profit forecast once in the current financial year. b) EasyMart Ltd.'s major competitor has decided to cease its current aggressive discounting and marketing campaign that it was waging to try and increase its market share. c) Technological developments have made 30% of the inventory on hand of Advanced Computing Ltd obsolete. REQUIRED For each of the independent situations described above, outline the impact, if any, on inherent risk. [Answer here]

Answer rating: 100% (QA)

Answer a A financially disruptive firm may be more inclined to falsify financial statistics in order ... View the full answer