Question

AP4.1 (LO 1) Basic Risk assessment Michael has drafted an audit plan for a new client. The client is Countrywide Capers, a party supplies rental business. Countrywide Capers earns 80% of its revenue from renting marquees, tables and chairs, lights, and other party equipment and 20% from sales of disposable table- ware, utensils, napkins, and tablecloths, Michael's plan shows that audit time is divided to reflect this revenue pattern (that is, 80% of the audit time is spent on the rental business and 20% of the time is spent on the retail business), Michael believes that the significance of the revenue activities should be the only driver of the audit plan because the client has no related parties and has a simple, effective corporate governance structure.

what questions would you have for michael before accepting his audit plan?

Answer 1

What steps are undertaken to ensure that the proper implementation of corporate governance structure?

What process is applied to understand the clients, industrial environment and factors of the economy?

How important transactions and accounts are reported?

If the risk of misstatement for hire revenue is proportionate to risk misstatement for retail revenue?

What is the process of internal controls assessment?

What is the work allocation to deal with the risk of fraud?

What are the closing procedures for different business segments?

Is there any risk associated with the continuity of the business?

What is the role IT department in dealing with risk issues related to the business segment?