Auditing Assignment 2 You have recently been appointed as the external auditor of Hope-well Limited, a manufacturer of refrigeration and air conditioning units. It is six months until the company's year end. Hope-well Limited had appointed another audit firm at the previous annual general meeting, but that firm has recently resigned. You are the audit senior in the team that will audit Hope-well Limited for the year ended 31 December 2020. A junior member of your audit team has identified a number of issues at Hope-well Limited; however, she is unsure of what impact these will have on the risk based audit approach. The issues are: 1. Hope-well Limited operates in a very competitive market with other ten companies. 2. There has been a high turnover of staff within both the finance and operational departments. 3. Hope-well Limited is hoping to expand the business through acquisition and aggressive sales and marketing targets. 4. The company has been operating close to its overdraft limit for at least two years. 5. The directors are also in the process of preparing an application for a substantial loan. 6. A preliminary analytical review indicates a good year for Hope-well Limited, despite the market for their product, as a whole, dropping. (a) Explain what you should consider and do before accepting the audit engagement from Hope-well Limited. (b) Identify and explain SIX audit risks that exist in the audit of Hope-well Limited? (c) Explain why it is not possible to eliminate audit risk completely.
Auditing Assignment 2 You have recently been appointed as the external auditor of Hope-well Limited, a manufacturer of refrigeration and air conditioning units. It is six months until the company's year end. Hope-well Limited had appointed another audit firm at the previous annual general meeting, but that firm has recently resigned. You are the audit senior in the team that will audit Hope-well Limited for the year ended 31 December 2020. A junior member of your audit team has identified a number of issues at Hope-well Limited; however, she is unsure of what impact these will have on the risk based audit approach. The issues are: 1. Hope-well Limited operates in a very competitive market with other ten companies. 2. There has been a high turnover of staff within both the finance and operational departments. 3. Hope-well Limited is hoping to expand the business through acquisition and aggressive sales and marketing targets. 4. The company has been operating close to its overdraft limit for at least two years. 5. The directors are also in the process of preparing an application for a substantial loan. 6. A preliminary analytical review indicates a good year for Hope-well Limited, despite the market for their product, as a whole, dropping. (a) Explain what you should consider and do before accepting the audit engagement from Hope-well Limited. (b) Identify and explain SIX audit risks that exist in the audit of Hope-well Limited? (c) Explain why it is not possible to eliminate audit risk completely.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Auditing Assignment 2
You have recently been appointed as the external auditor of Hope-well Limited, a
manufacturer of refrigeration and air conditioning units. It is six months until the
company's year end. Hope-well Limited had appointed another audit firm at the previous
annual general meeting, but that firm has recently resigned. You are the audit senior in the
team that will audit Hope-well Limited for the year ended 31 December 2020.
A junior member of your audit team has identified a number of issues at Hope-well Limited;
however, she is unsure of what impact these will have on the risk based audit approach.
The issues are:
1. Hope-well Limited operates in a very competitive market with other ten companies.
2. There has been a high turnover of staff within both the finance and operational
departments.
3. Hope-well Limited is hoping to expand the business through acquisition and
aggressive sales and marketing targets.
4. The company has been operating close to its overdraft limit for at least two years.
5. The directors are also in the process of preparing an application for a substantial loan.
6. A preliminary analytical review indicates a good year for Hope-well Limited, despite
the market for their product, as a whole, dropping.
(a) Explain what you should consider and do before accepting the audit engagement from
Hope-well Limited.
(b) Identify and explain SIX audit risks that exist in the audit of Hope-well Limited?
(c) Explain why it is not possible to eliminate audit risk completely.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education