You are the audit senior for a longstanding client, Chattel Ltd. Chattel produces good quality living...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You are the audit senior for a longstanding client, Chattel Ltd. Chattel produces good quality living room and bedroom furniture. The company then sells these in two ways: either to retail outlets for sale on the high street, or increasingly, direct to customers online. The furniture is 'flat pack', with the customer assembling the component parts within their own homes before use. Chattel's business has declined in recent years in part due to competition from other well-known furniture outlets. Your audit has not been going smoothly. The sales team has a new sales director whose appointment appears to coincide with poor controls in the sales process and low morale in the team. The analytics from your review of trade receivables seem unusual and you are starting to worry that there is fraud within the firm. Further information is provided in Appendix A. This is particularly urgent, as the directors of Chattel Ltd are now interested in complying with the UK Code on Corporate Governance. They have some enquiries related to this (Appendix B). Your initial audit did not highlight any doubts around management integrity or honesty. REQUIRED: (a) (b) (c) (d) Outline the audit risk model and briefly explain why Chattel may pose a high risk of material misstatement in its financial statements. Explain how analytical review and analytics may be used at the planning, testing and review stages of an audit.. With regard to the trade receivables analytics test and suspected fraud in Appendix A, explain: (i) The ways an audit team can consider fraud risk during an audit; (ii) Your next actions with regard to the suspected fraud. Notwithstanding the suspected fraud issue, respond to the directors of Chattel Ltd's enquiries, provided in Appendix B, about the UK Corporate Governance Code. You are the audit senior for a longstanding client, Chattel Ltd. Chattel produces good quality living room and bedroom furniture. The company then sells these in two ways: either to retail outlets for sale on the high street, or increasingly, direct to customers online. The furniture is 'flat pack', with the customer assembling the component parts within their own homes before use. Chattel's business has declined in recent years in part due to competition from other well-known furniture outlets. Your audit has not been going smoothly. The sales team has a new sales director whose appointment appears to coincide with poor controls in the sales process and low morale in the team. The analytics from your review of trade receivables seem unusual and you are starting to worry that there is fraud within the firm. Further information is provided in Appendix A. This is particularly urgent, as the directors of Chattel Ltd are now interested in complying with the UK Code on Corporate Governance. They have some enquiries related to this (Appendix B). Your initial audit did not highlight any doubts around management integrity or honesty. REQUIRED: (a) (b) (c) (d) Outline the audit risk model and briefly explain why Chattel may pose a high risk of material misstatement in its financial statements. Explain how analytical review and analytics may be used at the planning, testing and review stages of an audit.. With regard to the trade receivables analytics test and suspected fraud in Appendix A, explain: (i) The ways an audit team can consider fraud risk during an audit; (ii) Your next actions with regard to the suspected fraud. Notwithstanding the suspected fraud issue, respond to the directors of Chattel Ltd's enquiries, provided in Appendix B, about the UK Corporate Governance Code.
Expert Answer:
Answer rating: 100% (QA)
a The audit risk model is the process used to assess the risk of material misstatement in the financial statements This assessment is based on the auditors understanding of the clients business the cl... View the full answer
Related Book For
Auditing a business risk appraoch
ISBN: 978-0324375589
6th Edition
Authors: larry e. rittenberg, bradley j. schwieger, karla m. johnston
Posted Date:
Students also viewed these accounting questions
-
You are the audit senior of Ball Construction Corporation (BC), a small public company that enters into construction contracts with individuals and developers and builds to their specifications. BC...
-
You are the audit senior at Zhang Zi Zi Associates. Below are issues fixed by your audit teams: 1. Valentine Creativity is a bespoke designer label located throughout Chine. 40% of the inventory can...
-
For the following independent situations, assume you are the audit partner on the engagement. For each situation, using the framework for reporting decisions, decide what type of auditor's report...
-
Find the volumes of the solids generated by revolving the regions bounded by the lines and curves about the x-axis. The region between the curve and the x-axis from x = 1/4 to x = 4 y = 1/(2x)
-
Briefly describe how lean production systems differ from traditional production systems along each of the following dimensions: 1. Roles of plant employees 2. Manufacturing cycle times 3. Quality 4....
-
An auditor may have to perform "extended audit procedures" if the auditor identifies fraud risk as high. Identify five examples of extended audit procedures that might be performed if the auditor...
-
A piece of cloth is discovered in a burial pit in the southwestern United States. A tiny sample of the cloth is burned to CO 2 , and the 14 C/ 12 C ratio is 0.250 times the ratio in todays...
-
Home Products Company manufactures a complete line of kitchen glassware. The Beverage Division specializes in 12-ounce drinking glasses. Erin Fisher, the superintendent of the Beverage Division,...
-
What are some key factors in the development of the modern hospital in the United States? Is there one factor that stands out among the others through its importance?
-
Based on Figure 1-6 in the text, draw a diagram of functional segments for a manufacturer ofdiversified products. The general characteristics of the firm are as follows: a. The organization produces...
-
Bill operates a proprietorship using the cash method of accounting, and this year he received the following: $280 in cash from a customer for services rendered this year a promise from a customer to...
-
For this lab, we are evolving our Banking System of Lab4 so we can make it more robust and a bit richer in its services. The purpose is to apply further the concepts of inheritance, composition,...
-
f(x) = x-8x + 20x - 16 == Identify the y-intercept of the function.
-
Why do you think the works of Dickens and Bront were popular in Victorian society? How would you characterize the basic differences in their view of women?
-
A company is projected to generate free cash flows of $60 million per year for the next two years, after which it is projected grow at a steady rate in perpetuity. The company's cost of capital is...
-
In the Wall Bricks, Inc.s balance sheet lists net fixed asset as $15 million. The fixed assets could currently be sold for $12 million. Wall Bricks current balance sheet shows current liabilities of...
-
The following information is available for Tenor Music Store for the fiscal year ending December: Finish Inventory 100,100 dollars Shipping cost 8.900 Purchase discounts 15.000 Initial inventory...
-
Some people argue that the internal control requirements of the Sarbanes-Oxley Act (SOX) put U.S. companies at a competitive disadvantage to companies outside the United States. Discuss the...
-
How does a company measure the cost of an acquisition of a company? What factors often complicate the determination of actual cost? Explain how each factor complicates the calculation of cost and the...
-
Many organizations use the computer to generate purchase orders. Who is responsible for a purchase when the computer generates the purchase order? How does the responsible individual ensure that...
-
Multiple Choice Questions 1. In determining the primary responsibility of the external auditor for the audit of a companys financial statements, the auditor owes primary allegiance to a. The...
-
A very simple version of the normative model described in the text involves a simple economic growth process converging to a steady-state, where values do not change over time. \({ }^{14}\) A simple...
-
Go to the library or the Internet and, for a particular year, put together a data set of profits in agriculture in different geographical units of your state or country (e.g., counties of a U.S....
-
For each of the following social choice methods, which of Arrow's axioms are violated, and why: a. the Pareto criterion b. plurality-rule voting (of several choices, the one with the most votes wins)...
Study smarter with the SolutionInn App