Evaluate the independence of Kellie and MingYan.
- Identify and explain two (2) inherent risk factors which exist for STL.
- State the assertion affected by each risk identified. Only identify one assertion for each risk factor.
|(a) Inherent risk
|(b) Assertion affected by inherent risk|
- Assess inherent risk for STL. Justify your assessment.
- Identify two (2) strengths in internal control in the payroll cycle. (4 marks)
- Explain a misstatement this control should prevent. (4 marks)
- State a control test that you could undertake to test the control is operating as expected.
- Based on your assessment of inherent risk for STL in question 2 above and assuming control risk is LOW, assess detection risk.
- Explain how planning materiality is impacted by the assessment of detection risk.
- Identify two audit procedures the audit team could have undertaken to identify the subsequent events.
- On the last page of the case there are details of the substantive test Nisa performed on accounts payable.
- What assertion is most at risk in the Accounts Payable balance?
- Did Nisa’s substantive test provide evidence on this assertion? Justify your response
- Identify another audit procedure you would recommend Nisa performs to provide evidence on the accounts payable balance.
- Based on the Financial Reports, identify three (3) accounts, other than accounts payable that require further investigation. Explain why eachof these accounts require further investigation.
|Account||Why further investigation is required|
- MingYan believes an adverse opinion is appropriate based on the audit findings. Explain whether this is the appropriate opinion.
- Identify four (4) factors which indicate that STL meets the going concern assumption.