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Bellows Home Inspection is a private business that provides home inspection . It has been...

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Accounting

Bellows Home Inspection is a private business that provides home inspection . It has been in business for years and Ethan , the owner , is proud of their strong internal control system .

The business is showing a loss for the first time in five years . The business is very cyclical : the large majority of its sales occur when a home is purchased , so it is affected by the real estate market . It gets most of its business through Bellows Realty , a real estate broker company held by Ethan and his mother . Bellows Realty will directly purchase the home inspection from Bellows Home Inspection on behalf of its clients .

Bellows recently acquired a competitor , Home Guards Inc. To complete the purchase , it has received a significant loan from the bank . The bank will be a new user of Bellow's financial statements .

The accounting manager , however , has indicated that it has been difficult to integrate the operations of Home Guards because its internal controls over financial reporting were pretty much non - existent at the time of the acquisition .

Required : Identify four key audit issues in this company , and explain how these will affect your audit risk , using the audit risk model .

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