90.2K

Verified Solution

Link Copied!

QUESTION 2 (16 MARKS) You are currently carrying out risk assessment procedures at your client Swinn (Pty) Ltd, a manufacturing company and subsidiary within an industrial conglomerate. The following information pertains to this assessment: 1. The financial director has been very evasive in answering questions, generally displaying a very dismissive attitude to the audit. 2. Some of the products manufactured by Swinn (Pty) Ltd have not kept up with market requirements. 3. In prior years directors annual bonuses were based upon earnings reflected in the audited annual financial statements. This policy has been abandoned and directors monthly salaries have been increased. 4. The company decided to retrench its internal auditors in a cost cutting exercise; the holding company internal auditors will be available if required. 5. Close to the end of the year a number of complex entries relating to asset revaluations were put through. 6. For the six weeks prior to the year end, the credit controller was absent from work due to ill health. During this period a number of employees in the section took over his duties, e.g. authorizing credit terms, passing credit notes, etc. 7. Management is regarded by the staff as being very dictatorial as certain members of management will frequently override controls. Some staff members have expressed the view that the holding company puts too much pressure on management to perform. 8. Numerous transactions take place with other companies within the group. YOU ARE REQUIRED TO explain whether each of the above will increase or decrease your assessment of the risk of material misstatement. Your explanations should indicate - whether Page 11 of 20 FACULTY OF COMMERCE, MANAGEMENT AND LAW the risk of misstatement at financial statement level or at assertion level will be affected. You are not required to consider the information collectively

Answer & Explanation Solved by verified expert

See Answer