Answer the following questions based on the information presented for Cloud 9 in the appendix to this text and the current and earlier chapters. You should also consider your answers to the case study questions in earlier chapters.

Required

(a) Based on your conclusions from the case study questions in previous chapters (particularly chapters 4, 8 and 9), complete the worksheet following to determine the overall risk assessment and the acceptable detection risk.

(b) Based on your overall risk assessment and detection risk estimates, design substantive audit procedures for Cloud 9 Pty Ltd that would address the detection risk for the accounts: trade receivables (do not include the allowance for doubtful debts) and cash. When determining testing thresholds for your detail procedures, consider using a percentage of planning materiality that best reflects the relationship to the detection risk; that is if detection risk is high, the percentage of planning materiality should be high.

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Account assertion Trade receivables - existence Trade receivables - completeness Cash - existence Cash completeness Inherent risk Control risk Overall risk assessment Detection risk