Phillip Dale is a recent employee of RMGT Audit Firm. A new client Juicy Juice Limited has approached RMGT for the audit of its annual reports and Phillip was asked to start the preparation of the audit plan. Phillip knows only too well the importance of audit planning. It involves many considerations that help to develop more efficient engagements and provides auditors with important risk management techniques. Juicy Juice Limited operates in many overseas countries. The company employs over 2000 employees and is known for providing many great benefits for its employees. One of Juicy Juice’s biggest assets is its inventory as the company offers a large
Phillip Dale is a recent employee of RMGT Audit Firm. A new client Juicy Juice Limited has approached RMGT for the audit of its annual reports and Phillip was asked to start the preparation of the audit plan. Phillip knows only too well the importance of audit planning. It involves many considerations that help to develop more efficient engagements and provides auditors with important risk management techniques. Juicy Juice Limited operates in many overseas countries. The company employs over 2000 employees and is known for providing many great benefits for its employees. One of Juicy Juice’s biggest assets is its inventory as the company offers a large
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Phillip Dale is a recent employee of RMGT Audit Firm. A new client Juicy Juice Limited has
approached RMGT for the audit of its annual reports and Phillip was asked to start the
preparation of the audit plan. Phillip knows only too well the importance of audit planning. It
involves many considerations that help to develop more efficient engagements and provides
auditors with important risk management techniques.
Juicy Juice Limited operates in many overseas countries. The company employs over 2000
employees and is known for providing many great benefits for its employees. One of Juicy
Juice’s biggest assets is its inventory as the company offers a large variety of products
throughout the many overseas countries in which it operates. The company also regularly
purchase shareholdings in other companies.
The previous auditors of Juicy Juice have stated that the previous year’s audit had revealed
extensive material misstatements.
Questions
A. Discuss FOUR (4) of the steps in the audit planning process that Phillip should consider,
highlighting the importance of each step in the audit planning process.
B. Explain what is meant by inherent risk and outline FOUR (4) factors from the case that
would make for the high inherent risk.
C. Explain the effect of the extensive misstatements found in the prior year’s audit on inherent
risk, planned detection risk, audit risk, and the audit evidence that would be recommended.
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