Question

oblems AP41 (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 pattem (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 govemance structure. Required What questions would you have for Michael before accepting his audit plan?

Answer 1

The following are the questions for Michael before accepting his Audit plan:

Refer to the below image for more detailed information.

What questions for Michael before would audit you have plan 2 accepting his Recorrement : questions for Michael before The following are the accepting this audit plan: 1. Is the risk of misstatement of rental revenue asa dollar of risk of material missta toment audit plan dollar The the same for a retail revenue & should a What work has been done to provide there are no related parties and that issues with the client's corporate evidence that there are no governance Structure & The client is new, what work has been done to understand the client, its industry (both rental and set ait elements and the effect of the economy factors on the client 2 4 as the risk of fraud If not, how should the directly work on propotional to revenue ? troud be allocated ? J. What impact would I have on the risks with the two sogments of the bolin ess? IT relate to the rest of the client's controls & associated How does internal 6. What are the significant transactions and accounts ? 7. 7. Are closing procedures the same for the two segments of the buriness & Is there any going concern sisk? What are the risks and mitigating factors that are freely to occor in a rental and retail company a