Audit Risks Assessment Discussion[1821].docx - Audit Risks...

Audit Risks Assessment Discussion/Presentation
Case 1
You are employed by Ticker and Company, a firm of certified accountants. Giffnock Corp is a new audit
client recently taken on by the firm. Giffnock Corp is an importer and wholesaler of specialist computer
hardware.
During the year the company’s chief accountant resigned and in the three months leading up to the
appointment of her replacement, no checking had been performed on the monthly reconciliations of the
bank account and the receivables and payables ledgers
Required:
a) For the scenario, identify examples of inherent and control risk, clearly explaining the nature of
any misstatements that might arise in the financial statements.
b) From the scenario, identify any potential detection risk, and explain how the firm could minimize
this risk.
Case 2
Lime Ltd is a long established manufacturing company with a year end of September. The senior in
charge of the audit has been provided with extracts from the draft accounts for the year ended 30
September 20x7 prior to the final audit planning meeting with the financial accountant of Lime Ltd.
Extracts from the draft balance sheet as on 30 September 20x7
Draft Actual
20x7 20x6
$’000 $’000
Property and equipment 32,500 31,850
Receivables Trade 3,600 2,150
Other 250 200
Inventory raw materials 1,200 870
Work in progress 350 450
Finished goods 1,860 1,610
Payables