Red Minerals is being audited by your firm for the first time in 2015. In 2010, Red Minerals invested in a mining joint venture in Bangaloo, a country which recently experienced significant currency devaluation. In December 2013, there was a large chemical spill in the area surrounding the main centre of Red Minerals’ operations in Bangaloo, and the government is seeking compensation and asking for restoration work to be done. The story has been covered in the Australian press. In a review of documents you discover that in 2014, there was a raid on the homes of several Red Minerals’ employees, following a tip-off to police. The tip-off alleged that over several years, four members of Red Minerals mechanical staff had been stealing small tools from Red Minerals and re-selling them. To date, four members of Red Minerals’ staff have been charged with fraud and theft. You are aware that the Chief Operations Officer (COO) of Red Minerals resigned at the start of 2015 and a suitable replacement has not yet been found.

Required

Discuss the impact of the background material for Red Minerals on your likely assessment of entity-wide controls at Red Minerals.