You are an audit senior in an accounting firm. Your firm has recently won an audit for a company that operates within the mining industry; however, your firm does not have any other clients that operate in this industry. Your audit partner is concerned about his lack of knowledge of the mining industry. He is also concerned about the effect of the changes that were proposed to the taxation rate on mining as part of the 2010 Australian Federal Budget. He is aware of the requirement of ASA 315.11(a), which states that the auditor shall obtain an understanding of:

Relevant industry, regulatory, and other external factors and the applicable financial reporting framework.

Required

a. Prepare a list of all useful sources that you can use to obtain the required knowledge.

b. Prepare a memo to the audit partner on the ‘state of the mining industry’ and associated risk factors.

c. Outline the possible direct effect that the proposed new tax might have on the audit of mining companies.