If you had been the auditor of each company identify at least three inherent risks that you would have considered for each company in the audit planning phase? Justify your answer.
Westfarmer is a company that indulges in diverse operations. The company's businesses include, supermarkets, department stores, home improvement and office supplies; coal mining; insurance; chemicals, energy and fertilizers; and industrial and safety products (media.corporate-ir.net). On the other hand, Autodom is a company that provides automated alloy welding technological support to its customers. As an auditor, I would have identified the following risks:
This type of risk occurs when the auditors are unable to identify the internal errors and fraud that might have occurred in the company. It is important for the company to ensure that the figures and notes that are stated in the annual report and the financial statements are true and do not misrepresent anything (www.cpaireland.ie). This will help the company to work in a manner that will prove to be effective and will also ensure that the company is not undergoing any risk. It is the job of the auditors to make sure that the work that they have undertaken i.e. review of the annual report is done in an appropriate and effective manner.
For Westfarmer, the following inherent risks would have been identified:
As the company engages in different businesses, the risk of misrepresentation of information and figures will be very high.
The company operates in sectors such as coal mining, energy, insurance and fertilizers where the risk of business is quite high; therefore, this risk will impact in the preparation of the financial statements.
According to the message of chairman, sustainability should be ensured and it should be made sure by the people that they work in a manner that will prove to be successful for the company.
For Autodom, the following inherent risks will be identified:
The company experienced a difficult 2012 financial year and had incurred huge non-recurring expenses that amounted to $1.6 million approximately. This means that the internal operations of the company were not controlled properly; therefore, a lot of risks are associated with it.
The demand for the cars of is volatile which will impact the business and its operations. The company will have to make sure that it works in a manner that will affect the business in a negative manner.
Another risk that is associated with Autodom is that the company has not been performing well and has not been earning well since the past year; therefore, the company will have to focus on its operations so that it is able to work in a successful manner.
What audit procedures and/or tasks would you have planned to carry out in response to the inherent risks identified by you in 1 above?
Audit process elements provide a state of preparedness for identifying and ensuring compliance with the many external requirements. This is a management tool to maintain compliance with occupational safety and health of employees and the environment, and quality ...