BAC705 Auditing

a) Perform a strategic business risk assessment of LQFL to understand the business strategy and its ability to respond to changing environmental conditions. You may use a strategic management techniquesuch as SWOT analysis or PEST analysis. You are encouraged to research the current environmental factors facing a business such as LQFL in New Zealand at the present time.

b) Provide an assessment of the audit risk for the coming audit as high, medium or low. You need to support your answer with reasons.

c) Based on the information provided on pages 1 to 4 of the case study, identify the inherent risks in the coming audit.

d) Based on your risk assessment in question c) above, carry out a preliminary assessment of the overall risk of material misstatement, and decide whether it is high, medium or low. You need to justify your assessment.

e) Perform an overall analytical review of the financial statements of LQFL. Your review should include:

§ A horizontal and a vertical analysis of the 2019 and 2018 financial statements.

§ Calculation and analysis of relevant financial ratios for 2019 and 2018. You may find the financial ratio formulae on page 8 of this case study useful. Assume all sales are made on credit.

§ From the above overall analytical review, identify the financial statement accounts that will require special attention during the coming audit. You need to support your answer with reasons why these accounts will require special attention.


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