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.

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.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 22E: Ginnian and Fitch, a regional accounting firm, performs yearly audits on a number of different...

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