Question

Chris has drafted an audit plan for a new client. The client is Green Forest Camping Ltd, which offers hire equipment to clients seeking a cheap holiday or weekend getaway. Green Forest Camping earns 80 per cent of its revenue from hiring camping tents, tables and chairs, lights and other camping equipment and 20 per cent from sales of disposable crockery, cutlery, napkins and gas bottles. Chris’s plan shows that audit time is divided to reflect this revenue pattern (that is, 80 per cent of the audit time is spent on the hire business and 20 per cent of the time is spent on the retail business). Chris 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 a simple, effective corporate governance structure.

Required: List five (5) questions that you would ask Chris before accepting his audit plan?

Answer 1

1. Chris should be askes whether the trend of 80:20 revenue is inline with past trend or in the present year is showing an exceptional sales of more to hire business than retail business

2. Chris should explore for more driver for audit and not be based on business segment only. But it can explored customer wise i.e. Agency based or corporate based or individual based. It can also be explored geographical location wise

3.Chris should asked how the much the sufficient and appropriate audit evidences and documentation will be avaiable to the auditor for verfication. The purpose is to how well the documention is done by the client.

4. Chris should askes how the physical verfication of tent and other items which are given on rent will be carried out by the client to the auditor as the same would not be available for physical counting of asset.

5. Chris should also asked for how much period the hiring is made and the credit given to client for payment. Payment mode also asked whether the business is run on cash or digital mode or duo.