Use only the information provided under the heading “CASE STUDY”, to identify and discuss the risks of material misstatement at the overall financial statement level, which the audit team should consider to plan the 31 October 2021 year-end audit of Rent-a-Car Ltd.

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Johnson and Dlamini Incorporated (JD) is a large firm that provides accounting, advisory, audit and taxation services to their wide range of clients. JD recently obtained a contract to provide the extermal audit of Rent-a-Car Limited (RAC), a VAT registered group company listed on the Johannesburg Securities Exchange Limited (JSE). JD has sophisticated audit software to use Computer Assisted Auditing Techniques (CAATS) to obtain sufficient appropriate audit evidence, JD was appointed as the auditors of the company on 1 September 2021, after RAC's Chief Executive Officer (CEO) (Mr John Coetzee) dismissed the previous auditor. The financial year-end of RAC is 31 October 2021. Mr Victor Dlamini is the audit engagement partner assigned to the audit of RAC. Prior to the appointment of JD as the auditors of RAC, the firm provided advisory, taxation and accounting services to RAC for the last ten years. These services were provided by a team of Chartered Accountants under the supervision of Mr Victor Dlamini. On 30 September 2021, RAC listed on the JSE. JD was involved in the listing process by ensuring the governance structure of the company comply with the King IV Report on Corporate Governance. JD's involvement entailed sourcing and recommending to the RAC Board of Directors individuals to serve as independent non- executive directors in order to meet the JSE listing requirements. Most of these newly appointed directors are personal friends of Mr and Ms Dlamini. RAC provides its customers with a range of integrated motor car solutions, including car fleet rental and management options, car rentals and used car sales, through the successful operation of complimentary divisions and subsidiaries. Initially RAC was established in 1984 by Mr John Coetzee. Upon establishment of the company in 1984, Mr Coetzee was the sole owner. The Governing Body of RAC is a follows: Shareholding after listing on the JSE Name and Position surname Mr John Coetzee CEO and Chairperson of the Board. He is aso 20% 5% 5% the Chair of the Audit Commitee. Ms Sarah Dlamini CFO. She is the wite of Mr Victor Diamini Mr James Nkozi Communications, marketing and sales director. Ms Carla Leke Information Technology (IT) director. Independent non-executive drector and member of the Audit Commitee Independent non executive director and member of the Audit Committee. Ms Vicky Lee Mr Mike Dube Ms Helen Zulu Independent non-executive drector and member of the Audit Committee Johnson and Dlamini Incorporated (JD) is a large firm that provides accounting, advisory, audit and taxation services to their wide range of clients. JD recently obtained a contract to provide the extermal audit of Rent-a-Car Limited (RAC), a VAT registered group company listed on the Johannesburg Securities Exchange Limited (JSE). JD has sophisticated audit software to use Computer Assisted Auditing Techniques (CAATS) to obtain sufficient appropriate audit evidence, JD was appointed as the auditors of the company on 1 September 2021, after RAC's Chief Executive Officer (CEO) (Mr John Coetzee) dismissed the previous auditor. The financial year-end of RAC is 31 October 2021. Mr Victor Dlamini is the audit engagement partner assigned to the audit of RAC. Prior to the appointment of JD as the auditors of RAC, the firm provided advisory, taxation and accounting services to RAC for the last ten years. These services were provided by a team of Chartered Accountants under the supervision of Mr Victor Dlamini. On 30 September 2021, RAC listed on the JSE. JD was involved in the listing process by ensuring the governance structure of the company comply with the King IV Report on Corporate Governance. JD's involvement entailed sourcing and recommending to the RAC Board of Directors individuals to serve as independent non- executive directors in order to meet the JSE listing requirements. Most of these newly appointed directors are personal friends of Mr and Ms Dlamini. RAC provides its customers with a range of integrated motor car solutions, including car fleet rental and management options, car rentals and used car sales, through the successful operation of complimentary divisions and subsidiaries. Initially RAC was established in 1984 by Mr John Coetzee. Upon establishment of the company in 1984, Mr Coetzee was the sole owner. The Governing Body of RAC is a follows: Shareholding after listing on the JSE Name and Position surname Mr John Coetzee CEO and Chairperson of the Board. He is aso 20% 5% 5% the Chair of the Audit Commitee. Ms Sarah Dlamini CFO. She is the wite of Mr Victor Diamini Mr James Nkozi Communications, marketing and sales director. Ms Carla Leke Information Technology (IT) director. Independent non-executive drector and member of the Audit Commitee Independent non executive director and member of the Audit Committee. Ms Vicky Lee Mr Mike Dube Ms Helen Zulu Independent non-executive drector and member of the Audit Committee

Answer rating: 100% (QA)

Answer The risk of material misstatement is a function of the following parameters inherent risk and control risk In effect the risk of material misstatement is the susceptibility of the financial sta... View the full answer