MGAC01H3 Chapter : tb08.docx
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Question 2
You, a recent auditor with a local auditing firm, are responsible for the audit of a new client, PresentShop, a retailer of electronic home and office equipment in Western Canada.
PresentShop has 14 locations across Western Canada. It specializes in providing customers with the latest technology in home entertainment electronics such as televisions and DVD players as well as top of the line office technology such as computers.
The business was started 15 years ago in Alberta by two brothers who are still the only owners of the company. The brothers paid themselves a management bonus in 2017 of $60,000. The business has grown as a result of excellent advertising, good locations, and reasonable prices based on the ability of the company to buy in volume. Each store has a high degree of security such as electronic bars and video surveillance.
The accounting for the stores is all electronically performed. The sales tills are downloaded every day to the main office in Calgary which performs the accounting for all of the stores. The main office also has the warehouse from which all inventory is shipped to the stores.
Business has been relatively stable but the company does have pressure from American competitors moving into Canada as well as another Western Canadian competitor, B&C Sound. As well, the business tends to fluctuate with the economic cycles so recent government cutbacks in B.C. have resulted in lower sales. As a result of a decrease in profits, the company requires a significant loan from a bank and the bank has requested audited financial statements. It is the first year that the financial statements have been audited. The bank intends to use the inventory as collateral for the loan.
PresentShop has provided you with the following financial information for the years ending December 31, 2017:
December 31, 2017 (â000s) | |
Total assets | $48,900 |
Total revenues | $124,900 |
Total net income before tax | $23,500 |
Total net income after tax | $15,400 |
Required:
Assess inherent risk at the overall financial statement level. Conclude on inherent risk. Is it low, medium or high?
Assess control risk at the overall financial statement level. Conclude on control risk. Is it low, medium or high?
Conclude on detection risk and the level of substantive testing required.
Assess overall (planning) materiality
Question 3
Explain the approach adopted by auditors of identifying accounts and related assertions at risk of material misstatement. How does this approach help auditors to reduce audit risk to an acceptably low level?
Question 4
What is the relationship between materiality and audit risk?
QUESTION I
Project Background You have just completed a postgraduatediploma in project management and are currently registered for amasterâs degree where you have to carry out a mini research oncustomer care in your organization. Develop a project proposal onthe planning, execution, analysis and reporting of the research.All processes planned for should be finalized within 6 months fromthe 4th august 2018.
GENERAL PROJECT TASK
The following needs to be done:
You know:
ï· How to conduct research according to the study-guide
ï· Sample of respondents should be at least 100
ï· Pilot study to be carried out
You have:
You have constituted a good team, and have decided to pay asfollows:
Field Worker / Data Collector | $100 per day |
Statistician | $3800 |
Language Editor | $200 per hour |
Printer and Binder | $400 |
Note: Assign resources as much as you can to accomplish all youridentified tasks
State the objective i.e. why your help is needed. State theproject goal, plus any constraints or conditions. Break down thegoal into several objectives that will be researched, and the valuethat each objective offers to the research study.
List all resources that will be needed, including your researchprofessionals like a statistician. Discuss assumed resources,including research requirements. Especially note external resourcesand requirements, e.g. does the study need an externalreviewer?
Present the specific tasks you will do as a WBS, and give costestimates, with sub-totals at each level and total estimated cost.Briefly discuss the estimates, where the costs mainly go, andefforts made to save costs.
Discuss the project dependencies and list the tasks on thecritical path. Discuss the critical path tasks, and methods used toshorten the critical path.
List and discuss the milestones and the deliverables for each.Be very specific about each milestone, including the project finishmilestone.
Explain the general strategy that will be used to manage theproject to completion. Project must have at least two phases.Discuss how they connect to each other, and the milestones. Explainwhy you took this strategy. Summarise 10 most important projectrisks, and how they will be dealt with if they occur.
Briefly summarise, giving the overall project cost, the projectbenefits as bullet points, and the general strategy. Provide a listof meetings with research specialists and others involved in theresearch process, with details like who, when and where andestimated times, and desired deliverable.